Finland's prime minister today (10 August) proposed a banking sector-funded European crisis fund to recapitalise troubled banks as part of Europe's plans for a banking union to tighten supervision.
The premier of triple-A rated Finland – one of only four remaining eurozone members to retain the top credit rating – also said the European Union should fully implement decisions made to establish closer fiscal union.
"We should be able to build a system where banks cannot shake up whole countries. One solution in addition to monitoring could be European banks' crisis fund," Jyrki Katainen was quoted as saying in an interview with economic magazine Talouselama published today.
He suggested the fund, which would get its money from European banks, would be used to recapitalise viable parts of troubled banks.
Finnish crisis fund to go with banking union
The European Central Bank, the European Commission and eurozone member states are working on a proposal for creating a banking union and are debating what powers the new bank watchdog should get. The plan is expected to be announced in September.
While Katainen's government is pro-euro, it has taken a tough stance on bailouts and has demanded collateral in exchange for loans to struggling eurozone countries. It has also proposed measures such as the European bailout fund buying sovereign bonds in the secondary markets to support weak eurozone states.
The magazine said Katainen also said that too often recent decisions in the EU had been made as a result of talks between large economies like Germany and France.
Finnish fears over tax proposals
Katainen said that although he supports a strong European Commission, he wants national governments to keep control over taxation.
"I don't support that kind of EU, where the EU's budget is significantly increased or taxation responsibility and power is fully, or even in significant parts, moved to the union level,” he told the magazine.
He has said previously that he believes a strong European Commission is important to ensure smaller states have a say in decision making.
In a separate interview broadcast today through Finnish public broadcaster YLE, Katainen said that more co-operation was needed between the European Central Bank and national leaders in the eurozone “to soothe the markets”.
Whilst the Finnish leader praised the bank for acting “determinedly”, he added: “The ECB cannot solve this alone. We are cooperating very closely with our European colleagues to find a way to reduce the excessive panic on the markets."
He said markets have not acknowledged enough Italy's and Spain's work to stabilise their public finances as their actions are not reflected in their bond rates.
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