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Home News Finnish PM pushes to avoid Spain bailout

Finnish PM pushes to avoid Spain bailout

Published on 11/09/2012

Finnish Prime Minister Jyrki Katainen Tuesday backed Spain in its "unfair" financial crisis and encouraged it to avoid seeking a full sovereign bailout.

Katainen, who was a tough player in July negotiations for a eurozone rescue loan to Spain’s banks, showed a united front with Prime Minister Mariano Rajoy, amid high expectations that Madrid will ask Europe for a full financial rescue.

“The important thing now is to seek ways of avoiding new bailout packages,” Katainen told a news conference alongside Rajoy after talks.

“What’s essential is that a country commits to put its own economy in order. Everything else is just assistance,” he added.

“We are concentrating on seeking solutions.”

Earlier Katainen told a Madrid economic forum that there were still “lots of opportunities” for Spain to avoid being bailed out like Greece, Portugal and Ireland.

Rajoy said on Monday that he would not be rushed into a deal or surrender key powers over the budget.

Scrambling to rein in Spain’s borrowing costs, he has announced tens of billions of euros in savings measures including pay cuts and tax rises that have sparked mass street demonstrations.

Katainen, a strong defender of fiscal discipline, said he would not dictate to Rajoy what areas to make cuts in.

“I fully agree that the situation is unfair. Spain would deserve lower interest rates after having done that many austerity measures and especially structural reforms which will strengthen competitiveness,” Katainen said.

“I believe very strongly that after the measures the government has already done here in the Spain and that the government has promised to do in the next few years the Spanish economy will be very competitive,” he added.

“It just takes some time.”

He urged tighter European Union integration and bloc-wide banking supervision.

“We have to devise a way of stabilising the panicking sentiment in the financial market in order to give more time to countries themselves but also in order to give more time to financial markets, lenders, to assess what each individual country has already done,” he said.

“It is not fair that whatever the countries are doing, nothing seems to be enough.”

On Monday in his first television interview since taking power in December, Rajoy said he would not accept any bailout that dictated spending cuts or touches old-age pensions.

Despite a deepening recession, a jobless rate of nearly 25 percent, steep borrowing costs and huge debt repayments due this year, he said he would refuse to touch pensions or make further increases in value added tax.

The European Central Bank said last week it would buy government bonds to lower distressed states’ borrowing costs but only in return for strict conditions set by eurozone bailout funds.

The ECB announcement slashed Spanish borrowing costs, which had at times risen to dangerous levels over recent months.

His comments Monday left open the possibility of Spain trying to delay or avoid a bailout.

Rajoy said he was still reflecting and had not decided whether Spain would formally request such bond purchases or a bailout.

The announcement by Europe’s central lender was “a big step forward by the ECB to buy bonds in the secondary market if countries consider it appropriate,” he added, speaking alongside Katainen on Tuesday.

“We will do everything necessary at a European and national level to resolve the euro crisis for good.”