Finnish threat to rescue package for Portugal
Finnish opposition parties against bail-out plans, while deal needs approval from all eurozone states.
Portugal’s hopes of receiving a €78 billion bail-out depend on approval from the Finnish parliament for the rescue plan.
Jyrki Katainen, who is expected to become Finland’s next prime minister, said on Tuesday (3 May) that all political parties would contribute to determining whether to support the package put together this week by the EU and the International Monetary Fund (IMF).
Katainen’s centre-right National Coalition party supports the bail-out, but the Social Democrats and the nationalist True Finns, the next two biggest parties following last month’s election, oppose it. “If the majority of Finland’s parliament decides not to support Portugal and the bail-out facilities, then that is Finland’s official stance, which I will respect,” Katainen said shortly after the terms of Portugal’s aid package were announced.
Katainen has delayed talks on forming a government until the middle of the month, but in the meantime will open discussions with all political groups with the aim of agreeing Finland’s position by 13 May. That would give him a mandate in time for a meeting of finance ministers in Brussels on 16 and 17 May, when member states will be called on to endorse the rescue package. Under the terms of the European Financial Stability Facility (EFSF), the bail-out fund that was set up in the wake of the Greek crisis, for a bail-out to go ahead, all eurozone member states must approve (or abstain from approving) the plan.
Katainen, who held the position of finance minister under the last government, also intends to ensure that the parliament discusses proposals to expand the lending capacity of the EFSF, and the planned European Stability Mechanism (ESM) which will replace it in 2013.
‘A good deal’
In Lisbon, Jóse Sócrates, Portugal’s caretaker prime minister, hailed the EU/IMF agreement as a “good deal”. He said that the terms on the loans were more lenient than those imposed on Greece and Ireland, the other two eurozone countries to have obtained a bail-out.
With parliamentary elections in Portugal scheduled for 5 June, officials from the EU and IMF yesterday (4 May) began negotiations with opposition parties.
A European Commission spokeswoman said she expected the parties to sign up to an agreement before the end of this week. The opposition centre-right Social Democrat party, which is likely to head the next government under its leader, Pedro Passos Coelho, has already indicated support for the deal.
EU officials are keen to avoid a repeat of their experience with Ireland, where Enda Kenny, who became prime minister shortly after his country’s bail-out deal was agreed, is seeking to alter its terms.
Portugal’s bail-out agreement follows a month of negotiations between EU, IMF, European Central Bank and Portuguese officials. They have been under pressure to reach a swift conclusion because Portugal must refinance €4.9bn of debt before the end of June. Under the plan, Portugal will reduce its budget deficit from 9.1% of gross domestic product (GDP) in 2010 to 5.9% this year. It will cut its deficit to 3% of GDP in 2013, a year later than the target set by the government.
Sócrates said that under the terms of the deal there would be no reduction in the minimum wage, there would be no cuts in public sector salaries, and the minimum retirement age would not rise.
The country’s struggling banking sector is expected to receive €12bn to help it recapitalise.
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