Finland

Finland’s prime minister Jyrki Katainen is standing firm. As he arrived in Brussels on Thursday the 41-year-old centre-right leader made it clear Europe had to maintain the tough austerity course if it wanted to survive.

In a thinly veiled jibe at Nobel prize-winning economist Paul Krugman, who criticised the pro-austerity policies set by the European Commission’s economic chief and fellow Finn Olli Rehn, Katainen said that the debate around austerity versus growth might have academic value, but it has little value for common people.

“There are no shortcuts to creating new jobs and growth in a sustainable manner. Structural reforms might not bear fruit overnight, but are the best sustainable economic stimulus. Accumulating excessive debt is not,” said Katainen.

He added: “The future of our common currency can be guaranteed only if each member state keeps its fiscal house in order and takes the jointly agreed rules seriously.”

After the jump, you can find the Finnish leader’s full remarks: 

Finland's Jyrki Katainen, right, with Cameron during a visit to Downing Street last year.

In the run up to Friday’s big speech by British prime minster David Cameron on his country’s future in the EU, some of the loudest voices of concern have come from the UK’s closest allies, including Washington, Dublin and Warsaw.

In a meeting with a small group of reporters today in Brussels, Jyrki Katainen, the Finnish prime minister, added his voice to that list, saying that he cannot see what kind of competences Cameron could pull back from the EU.

“Being a member of the EU, and especially in the single market, you cannot kind of pick the raisins out of the bun,” said Mr Katainen, whose National Coalition party is closely aligned with British Conservatives on most major policy issues. “It’s very difficult to say what would be the competences that could be repatriated.”

Katainen added: “The EU without Britain is pretty much the same as fish without chips. It’s not a meal any more.” After the jump, we’ve transcribed the Finnish leader’s full remarks. 

Monti, left, and Katainen at last week's meeting between the two prime ministers in Helsinki

It is axiomatic that politics make strange bedfellows, but it would be hard to find stranger bedfellows than Finland, the orneriest of the eurozone’s austere north, and Italy, the biggest debtor in its troubled south.

Even before the eurozone debt crisis put the two countries on a collision course, Helsinki and Rome had their run-ins, particularly after Parma beat out a Finnish competitor to host the European Food Safety Authority – and then-prime minister Silvio Berlusconi poured salt in the wound by suggesting EU officials would prefer Parma’s famous ham to Finnish smoked reindeer.

But are there suddenly signs of a thaw – or even an alliance? First, Berlusconi’s successor, Mario Monti, last week decided to visit Helsinki for meetings with Jyrki Katainen, Finland’s prime minister. Now, top officials from Berlusconi’s centre-right party appear to be adopting a Finnish plan to help lower Italian borrowing costs. 

Timo Soini, the True Finns leader, is in a face-off with his fellow Finn, the EU's Olli Rehn.

It’s been a rough few weeks for Olli Rehn, the European commissioner in charge of economic affairs.

Last month, a Belgian minister lashed out at him for demanding the new government cut up to €2bn from its 2012 budget. Then he was forced to spend all of Monday night and Tuesday morning locked in a 14-hour session with eurozone finance ministers negotiating Greece’s bail-out. And today he had the unenviable task of announcing the eurozone would likely return to recession this year.

But if you really want to make the mild-mannered Finn angry, it appears you have to go another route: compare him Nicolay Bobrikov, the Russian general who ruled Finland in the early 20th century, before it gained independence. 

Finland's finance minister Jutta Urpilainen, left, and prime minister Jyrki Katainen

Senior European officials had hoped to finally bang out a deal today on Finland’s demand for collateral from Athens in order to participate in Greece’s new €109bn bail-out. But fellow Brussels Blogger Josh Chaffin reports in from Wroclaw, Poland, that the Finns don’t seem to be in a mood for compromise.

“I think we are going to debate about it, but unfortunately I don’t see that we can find a solution tonight,” Jutta Urpilainen, the Finnish finance minister, said heading into the meeting of her eurozone counterparts in Wroclaw. “We continue to negotiate. I’m optimistic that we can find a solution that everybody can accept.”

European Union officials have grown increasingly exasperated with the Finns, who made the demand for collateral part of the new governing coalition agreement reached after April’s indecisive national elections

Evangelos Venizelos, left, and Jutta Urpilainen, Greek and Finnish finance ministers, last month

The still-roiling dispute over Finland’s insistence on some sort of collateral to guarantee its portion of the new €109bn Greek bail-out only got slightly closer to resolution Friday, and more senior finance ministry officials – this time department deputies – will take up the issue Monday on yet another conference call.

As we reported last week, Friday’s teleconference mulled a proposal to broaden the collateral deal so that non-Finns can participate, and to have the Greek side put up non-cash assets instead of the current bilateral deal, which would have Athens put about €500m cash into a Finnish escrow account.

An official briefed on Friday’s call told Brussels Blog that a consensus appeared to be building around the non-cash plan, which would use Greek government shares in state-owned enterprises or “illiquid” real estate assets as collateral. But time is running short. 

Finland's prime minister, Jyrki Katainen, arriving at last month's emergency eurozone summit.

UPDATE: Thanks largely to uncertainty caused by the Greco-Finnish deal, Greek 10-year bonds dropped preciptiously Wednesday, with yields again close to 18 per cent — right where they were before July’s bail-out agreement.

The ongoing dispute between Finland and other eurozone members over the side deal Heslinki struck with Greece as part of Athens’ new €109bn is beginning to make market analysts jittery.

For those unfamiliar with the controversy, Finland has insisted that it get collateral from Greece to guarantee its portion of the new bail-out, and last week struck a deal which would have Athens putting an estimated €500m into a Finnish escrow account. Other countries have begun to cry foul, however, asking why Finland should get special treatment. Talks between eurozone finance ministry officials are expected to resume via teleconference on Friday.

As we reported earlier this week, the Moody’s rating agency has already weighed in with its concerns, saying the Finnish deal could not only delay the Greek bail-out but calls into question eurozone support for all future bail-outs. But other market watchers are beginning to raise similar alarms. Here is a quick cross-section of views that we’ve seen in recent days. 

Political junkies throughout Europe will, for one weekend at least, take their eyes away from the ongoing turbulence in Portugal and shift 3,500km to the northeast, where Finnish voters go to the polls on Sunday in what has become one of the most interesting national elections since the outbreak of the eurozone crisis.

As we’ve chronicled in the FT for several months, the once safely pro-EU Scandinavian country has seen an incredible surge in support for the populist True Finns party, which has run on an avowedly anti-euro and “no more bail-outs” platform. A victory for the party, led by MEP Timo Soini, could throw a huge wrench into EU efforts to rescue Portugal.

The final opinion poll going into Sunday’s vote shows True Finns support slipping a bit, however. Last month, a TNS Gallup poll put them in second place at 18.3 per cent, just 2 percentage points behind the front-running centre-right National Coalition party. The latest TNS Gallup survey had them at just 16.9 per cent, however, and a survey issued Thursday by public broadcaster YLE put Soini back in fourth with just 15.4 per cent.