Finnish PM-elect calms fears over Portugal bailout

AP News
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Posted: Apr 19, 2011 3:40 PM
Finnish PM-elect calms fears over Portugal bailout

Finland's prime minister-elect said Tuesday his country would not block plans for helping debt-ridden Portugal although difficult coalition talks in Finland might mean changes to that bailout program.

Outgoing Finance Minister Jyrki Katainen, who is trying to form a new majority government after Sunday's parliamentary election, said he will demand that all coalition members accept Finland's commitments for aid to Portugal as a precondition to joining the government.

As the head of the largest party, Katainen has the task of forming a majority government. But the popularity of the two euroskeptic parties, which came in second and third in the poll, has sent fears through Europe that Finland could derail eurozone plans for bailout packages _ including the one that is being negotiated for debt-ridden Portugal _ decisions that require unanimity in the 17-member eurozone.

Experts from the European Commission, the European Central Bank and the International Monetary Fund are currently in Portugal to thrash out a strict program of budget cuts and economic adjustment.

"The Portugal package is something that no one can escape," Katainen said. Other government partners "must take a stand on it, and it must be such that Finland doesn't create problems but helps solve them."

Katainen, who negotiated Finland's commitments to other eurozone aid packages, including Ireland and Greece, said some changes might have to be made to Portugal aid. However, it was unclear what he meant as nothing has yet been agreed.

"Let's see what those might be but in any case they can't be very major changes," Katainen told reporters. He gave no details.

Katainen's conservative National Coalition Party won most votes on Sunday, giving it 44 seats in the 200-member Parliament, just ahead of the opposition Social Democrats with 42. The nationalist True Finns won 39 seats in an unexpected surge from 5 seats in the previous election.

Finland has pledged about euro8 billion ($11.5 billion) in guarantees of a total euro440 billion ($634 billion) in the eurozone's main bailout fund. Those likely will increase significantly as the currency union completes a promised boost of the fund's lending capacity.

If the small Nordic country, where government decisions on major EU policy are subjected to parliamentary approval, votes against a Portuguese bailout program the European Financial Stability Facility would be paralyzed. If it merely abstains, the remaining eurozone countries could in theory go ahead with a bailout without Finnish contributions.

Both the Social Democratic Party and the True Finns have said they want to be in the next coalition, but have acknowledged that finding common ground on a government program with the conservatives would be difficult.

The Social Democratic Party, which steered Finland into the European Union in 1995, doesn't oppose bailouts but has demanded that European banks and creditors be made more responsible when planning funding for debt-ridden eurozone members.

True Finns leader Timo Soini, who is a member of the European Parliament, doesn't see why Finnish taxpayers should help "squanderers" like Greece, Ireland and Portugal. He said that Finnish money "mustn't be splashed out on mechanisms that don't work," but added that Finland won't dictate "conditions for the rest of Europe."

The conservatives' main partner in the outgoing coalition, Prime Minister Mari Kiviniemi's Center Party dropped from top spot to fourth in the election and said it would go into the opposition. It approves of the funds.

Political compromise is common in Finland which has been ruled by decades of consensus politics, including unlikely coalitions that have comprised former communists, conservatives and greens.

Jan Sundberg, professor of political sciences at the University of Helsinki, said a coalition of the three largest parties, which would mean a clear majority in Parliament with 125 seats, is not implausible.

"Stranger things have happened," Sundberg said. "Finnish politics has been full of similar compromises."