Published March 24, 2013
SAARISELKA – Euro zone bailouts are getting tougher to agree as opposition within creditor nations grows and indebted states struggle to persuade citizens to back austerity, policymakers said on Sunday.
At a meeting in Finnish Lapland this weekend, attendees including Ireland's Europe Minister Lucinda Creighton and host Prime Minister Jyrki Katainen sounded confident that Cyprus would secure a bailout deal to avoid financial collapse.
But they added the crisis was a reminder of the work needed to make sure EU member states stand by shared fiscal targets.
Toomas Hendrik Ilves, president of Estonia which joined the euro in 2011, said many saw bailouts as unfair.
"The result has been, over time, a decreasing willingness on the part of governments to go along with bailing out because their publics are not willing to go along with it, and so their parliaments are not going along with it," he said.
"It's going to get harder and harder to get things such as EFSF and ESM (bailout funds) passed in parliaments if we don't see more responsibility taken by those who need assistance."
In Finland, one of the few remaining countries in the euro zone to be rated triple-A by all major credit rating agencies, the anti-euro Finns Party has become a major opposition force, with voters viewing bailouts of countries such as Greece and Portugal as a reward for profligacy.
"When it's a union of values, it means that we have to have a strong sense of fairness," Katainen said. "One of the reasons we are in a crisis is that everybody did not follow the rules."
The small Nordic economy endured a wave of bankruptcies and years of austerity after a banking crisis in the early 1990s. That experience, as well as the rise of the Finns Party in 2011 elections, has forced the broadly pro-Europe government to take a tough stance on bailouts.
Finnish European affairs minister Alexander Stubb said the Cyprus deal, expected to "bail in" top bank depositors, would mark a step away from previous rescue packages by forcing investors to share the burden, as countries such as Finland and Germany have demanded.
"We're going towards the system of a bail-in, and I think that's the message that's being sent in this particular rescue package," he said of the Cyprus bailout.
Stubb said the worst of Europe's debt crisis was over, although he didn't rule out some flare ups.
"We are going to get a few market turbulences still, it's quite clear, but it's not as fundamental or systemic as the ones we had when we had other countries on the brink," he said.
Ireland's Creighton said the experience in Ireland, which is expected to exit its bailout program this year after over two years of fiscal reforms, proved that bitter austerity medicine worked when applied with honesty.
(Editing by Mark Potter)