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Finland's Bailout Blues Cast Pall Over Euro Zone
Wall Street JournalHELSINKI—The euro zone's attempts to reassure bond investors that it can fix its debt problems may be derailed Sunday when Finns go to the polls to elect a new government.
According to recent opinion polls, voter support for the nationalist True Finns Party has soared in recent months, partly in response to dissatisfaction with the fact that taxpayers in this most northern of the euro zone's 17 members have been asked to bail out Greece, Ireland and Portugal at the same time as welfare benefits are being cut at home.
The True Finns oppose any aid to fellow euro-zone members, and may be part of a new coalition government, most likely alongside the National Coalition Party and the Center Party—both of which are part of the current government.
The True Finns want further restrictions on immigration, and argue social-welfare benefits should be maintained.
According to an opinion poll conducted by TNS Gallup on behalf of the newspaper Helsingin Sanomat between April 5 and 10, 16.9% of voters intend to back the party, down from a record high of 18.4% in March, but still a huge increase from the 4.1% of votes it received in the 2007 election.
"The True Finns will not participate in a coalition government with any party ready to give further loan guarantees," Vice Chairman Vesa-Matti Saarakkala said.
If they were to enter government, the True Finns wouldn't be in a position to dictate policy towards the euro zone, but would have a significant influence.
"If the True Finns were to be part of the next government they would be forced to make compromises," said Jan Sundberg, a political analyst at the University of Helsinki. "Finland's EU policy would still be skewed a few degrees towards the True Finns' policy."
The party vows to veto any increase in Finland's contribution to both the temporary European Financial Stability Facility, or EFSF, and the permanent European Stability Mechanism, or ESM.
Like other euro-zone countries, Finland has helped bail out Greece and Ireland and is now called upon to rescue Portugal. So far Finland has committed to guarantee almost €8 billion ($11.54 billion) related to the EFSF, and further guarantees and investments of €12.58 billion related to the ESM, which is to begin functioning in July 2013. Finland has also given a €1.48 billion loan to Greece, a €160 million loan to Iceland and promised a €324 million loan to Latvia.
Finland's public sector debt is less than 50% of gross domestic product and its budget deficit is 2.5% of GDP, under the EU limits in both cases. It is one of six euro-zone members that have a triple-A rating, and whose guarantees are therefore crucial to ensuring that the EFSF can borrow cheaply in the international bond markets. The EFSF then lends that borrowed money to countries in need.
Disapproval of the bailouts was also a factor driving a rise in support for the right-of-center National Front in France's recent local elections, and contributed to the weak performance of Germany's governing parties in recent state elections.
However, should the True Finns participate in the next government, it would mark the first time that a party openly protesting the bailout would participate in policy-making at a national level.
The liberal National Coalition Party led by Finance Minister Jyrki Katainen remains the most popular party, with 20.2% of voter support, compared with 22.3% of the vote four years ago, according to the TNS Gallup.
The agrarian Center Party led by Prime Minister Mari Kiviniemi polled 17.9%, down from 23.1% in the 2007 election.
Both parties have said they would be willing to form a coalition government with the True Finns. The opposition Social Democratic Party received support from 18% of those polled, down from 21.4% of the vote in 2007.
With only five days left until the general elections, candidates are now mainly focusing on strengthening their core messages, with the parties positioning themselves to participate in what most likely will be another coalition government. And, with three of the four largest parties polling within a margin of error plus or minus two percentage points, the elections are set to become a close race.
Last week, Ms. Kiviniemi said Finland still is committed to guaranteeing financing to countries that request it, but that a bailout package for Portugal would need to be "very tight."
"The economic program should be made tighter than the one the Portuguese parliament turned down two weeks ago," Ms. Kiviniemi said.
Mr. Katainen estimated that the bailout package for Portugal would be between €75 billion and €85 billion, of which Finland would have to guarantee about €1.2 billion.
The popularity of the True Finns suggests that a decades-old system of consensus politics could be breaking down. Until now, the two largest parties have gone on to form governments after votes were counted, with the third mounting a not-too-aggressive opposition.
"The political elite have not really listened to the people of Finland," said Risto Heiskala, professor of sociology at the University of Tampere in Finland. "That has created a space for political protest to which the True Finns party is now giving a voice."
According to Mr. Heiskala, the popularity of the True Finns is a product of the charisma of party leader Timo Soini. That is a potential weakness for the party because Mr. Soini, 48 years old, was hospitalized ahead of parliamentary elections in 2007 and again before voting for the European Parliament in 2009. In both cases, the hospital stays were attributed to pneumonia related to Mr. Soini's heavy work scheduel. His workload certainly wouldn't be reduced after the upcoming election, in which he stands a real chance of securing a ministerial post.
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