The Finnish prime minister has reiterated Finland’s resistance to using the euro zone’s Emergency Stability Mechanism to directly recapitalise banks retrospectively.
Speaking to The Irish Times at a meeting of EU leaders on Saturday, Prime Minister Jyrki Katainen said Finland was against the use of the fund for legacy assets. "We are not that enthusiastic, we don't like the idea of using taxpayers' money for legacy assets, because in the long run we should avoid taxpayers being burdened in banking crises."
Mr Katainen hinted Finland was supportive of Ireland and Portugal’s bid for the adjustment of the maturities of their EU bailout loans. Sources have suggested Portugal could get more lenient treatment, given Ireland’s already successful issuance of 10-year government debt and its falling bond yields.
'Excellent job'
Mr Katainen said: "Both countries, Portugal and Ireland, have done an excellent job and I think nobody has in mind any special kind of punishment. Now we have to encourage the countries to stay on the right path."
Euro zone finance ministers are due to reach a decision on Ireland and Portugal’s request for the adjustment of the loans given to them by the European Financial Stability Facility and European Financial Stabilisation Mechanism funds at next month’s meeting in Dublin. Sources suggest this timetable is on track, despite Cyprus.
Minister of State for European Affairs Lucinda Creighton, who met with the Finnish prime minister this weekend, said she did not believe Ireland’s campaign for debt relief would be affected by its successful 10-year bond auction..
“Anybody who’s watching what’s happening in Ireland understands the economic situation. It's not just about re-entering the markets at the end of the year. This is a medium- to long-term strategy. We want to re-enter the markets and we need to stay there,” she said. “Tools such as the extension of the maturities of Ireland’s EFSF and EFSM loans matter, and I think every other euro zone member state around the table understands that.”
Finland, along with Germany and the Netherlands, issued a joint statement last September following the agreement in June by EU leaders to break the link between sovereign and banking debt. This outlined its opposition to the use of the ESM fund for legacy assets. The Government is pressing for the fund to be used to directly recapitalise AIB and Bank of Ireland.
Finland last week agreed a four-year budget, including cutting corporate tax to 20 per cent. With public debt at about 53 per cent of gross domestic product, Finland has one of the lowest debt to GDP ratios in the euro zone. The Finnish government has introduced budget adjustments of 3 per cent of GDP over the last two years.
Correct path
Mr Katainen said Ireland had been decisive since the bailout. "Look at government bond yields, they're at very sustainable levels . . . Ireland has done exactly the right things, even though they were very painful. The public and investors have seen that Ireland is a trustworthy country – it does what it has promised."
