THE ROLE OF FINLAND:THE RISE of a populist anti-EU party in Finland's general election campaign has derailed plans for this summit to secure final agreement on the overhaul of the European Financial Stability Facility (EFSF), the single currency's temporary bailout fund.
After an agreement on a permanent fund, the expansion of the EFSF’s lending capacity is one of the last outstanding issues in the effort to reinforce the rescue net for euro countries.
The EFSF is backed by €440 billion worth of guarantees from euro zone countries but its lending power is limited to €250 billion as a condition of the triple-A credit rating it relies on to secure favourable borrowing rates. This is because only six of the 17 euro zone countries – including Germany and Finland – are beneficiaries of AAA rating.
EU leaders want to increase its lending capacity to €440 billion as part of a new “grand bargain” for the euro zone and most of them, particularly the triple-A countries, agree this should be done by increasing the fund’s guarantees.
But Finland’s centre-right government, under pressure as support rapidly grows for the Eurosceptic True Finns, has refused to increase its guarantees and is not expected to agree an increase at this summit.
As a result, a senior European diplomat said a draft summit communique was crafted to say the legal execution of EFSF reforms would be finalised by the end of June. “It’s understood the Finnish government cannot give any commitment on this matter before its general election,” said the diplomat.
Support for the True Finns, led by Timo Soini, has quadrupled since elections in 2007. Polls before next month’s election put his party in second place behind the centre-right party of finance minister Jyrki Katainen, with the Centre Party of prime minister Mari Kiviniemi in third place.
Mr Soini has said he would demand to renegotiate the terms of Europe’s bailout schemes if he is to participate in a government.
A European official said the intention remained to strike an overarching deal at the summit, thus enabling euro zone countries to present a single package of measures for national ratification by June.
Mr Katainen, the leading candidate to head the next government, has played for time on the EFSF’s overhaul. He has taken a hard line on Ireland’s request for lower interest costs, saying “there are no free lunches” in the bailout.
