Finland to eurozone: We aren’t responsible for other countries’ debts

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Michael Bastasch DCNF Managing Editor
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Forget a Grexit or a Spanic, now Finland is threatening to leave the eurozone.

Finnish Finance Minister Jutta Urpilainen let Europe know that the nordic country is not willing to hang onto the euro at all costs, AFP reports.

“Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland,” Urpilainen told financial daily Kauppalehti, adding, “Finland will not hang itself to the euro at any cost and we are prepared for all scenarios.”

Urpilainen stressed that Finland would not be responsible for other countries’ debts and noted that Finland remains one of the few eurozone countries with a triple-A credit rating.

“Collective responsibility for other countries’ debt, economics and risks; this is not what we should be prepared for,” Urpilainen said.

Last week European Union leaders met to discuss a wide range of policy considerations for mitigating the financial contagion that’s spreading across the continent in an effort to come up with some sort of bailout agreement and ease market fears of a financial crisis.

EU leaders agreed to allow ailing banks to be recapitalized directly without adding to the sovereign’s debt and to buy bonds to lower the borrowing costs for heavily indebted countries like Spain.

Spanish and Italian bond rates fell sharply last week as these proposals brought some confidence back. However, bond rates have been creeping back up for both countries as pessimism returns. The European Central Bank didn’t indicate whether it would take emergency action to ease borrowing costs for Spain and Italy.

Also shaking investor confidence is Europe’s terrible economic performance. Unemployment in the EU is at a record 11.1 percent. The rate is much higher in Spain, at 24.6 percent overall and at 50 percent for those under 25. Greece has an unemployment rate of 21.9 percent and a youth unemployment rate of over 50 percent as well.

Ireland and Portugal also have high unemployment at 14.6 percent and 15.2 percent, respectively. Even France has seen its unemployment rate inch up, from 9.6 percent in May 2011 to 10.1 percent in May 2012.

There are also political troubles to consider. The French and Greek elections caused widespread fear across markets that the financial crisis would worsen. France’s new president has been resistant to cuts, instead pushing for more spending. Greece faced two rounds of elections after the initial result produced a deadlock between pro- and anti-bailout parties.

Now in Germany, Chancellor Angela Merkel’s own party is beginning to criticize her concessions to pressures from other countries like France, Spain and Italy.

Despite mixed outlooks, Finland isn’t looking to leave the euro without good reason. “We are constructive and want to solve the crisis, but not on any terms,” Urpilainen said.

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