Finns won’t halt Portugal bailout, but future aid up in air
The spectacular rise of the True Finns won't halt Portugal's bailout, but will make it much harder for Brussels to maintain financial solidarity across the EU, analysts warned Monday.
After Greece and Ireland, European Union and International Monetary Fund experts began work in Lisbon on Monday, negotiating the third bailout in less than a year of a debt-ravaged, peripheral eurozone nation.
At the same time, a renegotiation of Greece’s repayments seems inevitable and voters are asking: what would happen if Spain or Belgium, other heavily-indebted states with huge internal political strains, also need help?
“These are an amazing set of results, and prove conclusively that euroscepticism can win, and win big,” roared Nigel Farage, the arch-critic of European Union integration and head of the UK Independence Party.
Farage and True Finns leader Timo Soini are formal allies in theEuropeanparliament, and the Englishman underlined: “The True Finns have run on a platform of saying no to further EU bailouts and yes to national democracy.”
Once tiny, Soini’s anti-EU, anti-immigration party captured 39 seats, up from six in the outgoing Finnish parliament.
They can be expected to negotiate a lurch to the right in coalition talks — putting potential spokes in the wheels of closer European economic integration seen in Brussels as the required long-term fix to the debt crisis.
What began as a banking crisis, an economic crisis and a social crisis has now “become a political crisis,” Belgian Prime Minister Yves Leterme said last month.
But while Sunday’s results are “a clear warning shot,” further support for European financial rescue planning “is not yet endangered,” insisted Frank Engels of London-based Barclays Capital Research.
He said it was “highly likely” that current finance minister Jyrki Katainen will become Finland’s next prime minister, highlighting a “decisively pro-European” campaign with “support for euro area member states in crisis.”
“But it is clear to us that it will be increasingly difficult going forward to agree on additional support measures, i.e. above and beyond the programmes for Greece and Ireland as well as the to-be-agreed programme for Portugal.”
Germany has already imposed tough conditions on electorally-damaging support for profligate neighbours, while British finance minister George Osborne is determined to ensure non-euro London will not be locked into future eurozone bailouts under a European Stability Mechanism due to be set up by EU leaders.
Paul Hofheinz, the head of the Lisbon Council think tank and a 13-year veteran of the Brussels political scene, expects coalition horse-trading to deliver a government in Helsinki that will cough up for Portugal.
“The economic issues implied by the possibility of Portuguese default are so large I’m inclined to think they will find a solution — this is a major strategy matter for all of Europe. I don’t buy the Doomsday scenario,” he said.
“There is a lot of movement away from solidarity,” Hofheinz noted, citing a second referendum in Iceland that saw voters reject a deal to repay British and Dutch taxpayers for bailing out savers who lost deposits in failed Reykjavik banks.
But, he underlined, “only people with very short memories and little knowledge of economics can think a default is in any way a good thing,” referring to the worst-case scenario for Greece.
For the wealthy north, southern Europe is one “that doesn’t work and which runs up debts,” noted Jean-Dominique Giuliani, a vastly-experienced Brussels analyst with the Robert Schuman Foundation.
The message from Brussels is “severe, punishing, a bit sinister and cold — offering little hope,” and yet “Europe has no other option but to be tough on economic policy,” he stressed.