The Corner

With Collateral in Tuonela

Finland is now the only euro-zone country with a stable triple-A rating from Moody’s (the outlooks for Germany, Holland and Luxembourg have just been downgraded). In part that reflects the country’s (uniquely) successful insistence on securing collateral for its participation in both the second Greek rescue and the new Spanish (bank) bailout. We will have to see (maybe) how well this collateral would really work in the chaos of a disorderly Eurozone collapse, but Moody’s at least was impressed.

Meanwhile the Finnish finance minister has been interviewed by Der Spiegel. Her responses reveal a classically Finnish mix of understatement and determination and, indeed, even show traces of democratic sensibility. Well played, Jutta Urpilainen!

Some extracts:

Urpilainen: …we need  collateral, because we as a government are bound by a coalition agreement on this. It is important to be careful with the money of the taxpayers. That is why we find it good that the taxpayers receive something in return for public loans.

SPIEGEL: Finland will also get a guarantee if Greece goes bankrupt. Have you received Greek islands as collateral?

Urpilainen [ignoring the naughty island question, and deftly reminding the German interviewer that the joke is really on him]: We have received bonds issued by solvent countries like Germany with a value of about €900 million as collateral. The mechanism is quite simple: whenever the Greeks request more money, our collateral increases.

That “quite simple” is very nicely done.

SPIEGEL: How have other European finance ministers reacted to your initiative?

Urpilainen: Naturally my colleagues don’t find it especially good. But I have told them from the beginning that we have no room for maneuver. It is really simple: if we don’t receive guarantees we cannot pay into the rescue packages. That is in our government program….

“Don’t find it especially good”. I’ll say. Keep them coming, Jutta.

SPIEGEL: Hundreds of billions of euros are being mobilized from solvent countries like Finland and Germany to save the euro. In spite of that the crisis is only growing. Can you imagine Finland leaving the euro?

Urpilainen: We want the euro to remain intact. However, every country must bear the principal responsibility for its own economy and its own debt. It was important to arrange the bailout packages. But our solidarity is limited…. If we can’t bring our citizens along with us, than we will fail. As the head of the Social Democratic party, I must respect the opinion of my voters. There is a party here called “True Finns” that publicly supports a euro exit. They won many votes in the last election.

Indeed they did.


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