LAST WEEK’S intergovernmental deal to stabilise the euro could yet fall victim to domestic politics in Finland or Denmark.
Finland’s coalition government is split over a proposal to allow the permanent bailout fund, the European Stability Mechanism (ESM), to make emergency payments with a qualified majority. This majority, based on 85 per cent of subscribed capital, is at odds with Finland’s position ahead of the summit, when it said its future support was conditional on a unanimous vote from all donor countries.
Finland’s conservative prime minister, Jyrki Katainen, agreed to the majority vote deal, pending parliamentary approval, but the shift in position is opposed by his Social Democrat finance minister, Jutta Urpilainen.
The spat has echoes of tensions earlier this year when the coalition, under pressure from a strong Eurosceptic opposition, called for collateral for future loans to Greece.
“Finland wants to be a full-fledged euro country and bear the responsibility for creating stability in a way that respects the equality of member states,” said Mr Katainen yesterday in Helsinki.
Under pressure, however, he said Finland opposed allowing the so-called “super majority” of 85 per cent to increase the fund’s size and, thus, Finland’s financial contribution.
Friday’s agreement wrong-footed Ms Urpilainen, who briefed journalists as talks were proceeding that Finland would not concede the unanimous voting principle. She rejected the change, saying: “Either we keep to the original agreement that decisions are taken unanimously on the permanent mechanism or Finland doesn’t participate in the permanent mechanism.”
Constitutional experts in Finland are divided over whether the Nordic country can participate in the ESM on the modified terms of operation. The most likely resolution would be for the shift to majority voting to be put to a parliamentary vote, where it would require a two-thirds majority.
But Mr Katainen cannot be sure of clearing that hurdle, particularly if his main coalition partner refuses to support the vote. His government has 124 seats, nine short of the two-thirds majority.
Bailouts were a central theme of last April’s election campaign, in which there was a fourfold increase in support for the Eurosceptic, bailout-critical True Finns. To counter this challenge, the Social Democrats struck a tough line on assisting Greece. Any shift now could result in the party losing further support to the populist opposition.
Similar problems plague the Danish government. Danish prime minister Helle Thorning Schmidt told her EU colleagues on Friday that Denmark was likely to sign up to the deal.
However, Danish foreign minister Villy Søvndal of the Left Party aired concerns about austerity measures in the intergovernmental deal. His main issue is the obligation on national governments to cut borrowing to 0.5 per cent of gross domestic product.
This could be “very difficult for Denmark”, he said.