News reports on Tuesday suggested that Finland, one of the few eurozone countries with a triple-A rating, was suspected to have been behind the unprecedentedly severe rescue package conditions for Cyprus.
During past bailout negotiations, Finland wanted - perhaps rightly so - to establish itself as the responsible adult in the room. Unlike many southern European states with mismanaged economies, Finland learned the lessons of its banking crisis and the subsequent recession 20 years ago.
Finland’s impatience in the face of sloppy fiscal policies prompted analysts to speculate about the country’s future in the eurozone. For instance, Nouriel Roubini, one of the most respected prognosticators of global economic trends, has often argued that Finland will eventually be the first country to leave the single currency. However, it should be remembered that Finland has also benefited from the euro, mainly in terms of paying lower interest on debt which significantly benefits Finnish companies.
Nevertheless, Finnish opposition to the euro is rapidly growing. Finns feel that they are constantly paying for other countries mistakes. Germany is often viewed as the most uncompromising in its bailout demands, but if recent reports are any indication, Finland is the bad cop in the eyes of Europe’s debt-ridden economies.
During the latest negotiations between IMF, EMU and Cyprus, Finland was reported to have been responsible for the levy tax obliging Cypriots to pay up to 10 per cent of their savings to foot the costs of the rescue package. However, Finland has rarely succeeded in its demands as the Greek and Spanish bailouts showed. Tough posturing is meant for domestic consumption to keep the critics at bay. The Finnish euro bailout dance usually starts with the finance minister Jutta Urpilainen and prime minister Jyrki Katainen rejecting reports that a given Mediterranean country is in need of a massive bailout. When the bailout becomes a reality, both Katainen and Urpilainen calm the public that Finland will not give a cent unless it received guarantees. After it becomes clear that other eurozone countries do not subscribe to Finland’s line of thought, the bailout passes without guarantees and Urpilainen and Katainen stand in front of the the Finnish media explaining that cooperation comes with a responsibility to compromise.
Henry James once said that a good compromise is reached when both sides are unhappy. In Finland’s bailout dance, only the Finnish tax payer is left unhappy.
The euro might very well survive the possible departure of Cyprus from the eurozone, but if Finland departs, all bets are off.
