Many Finns are deeply concerned about the on-going economic challenges prevalent in Europe. I share these concerns. I can assure you that we the Conservative party MPs really put a lot of effort into thinking about different possibilities that we could explore in resolving the future of the euro. What different options are there? Are there any viable alternatives for us to choose from?
Our Parliament convened especially on 19th of July, and interrupted its summer holiday, for the first time in 50 years in order to consider the different options. The discussion was genuinely open. That was an opportunity for the two opposition parties to bring to the table their alternative solutions. Unfortunately, they didn’t. The True Finns didn’t know, and they still don’t, whether or not Finland should stay in the euro. They suggested a new, free trade area for those North European countries that fulfill the euro criteria. The leader of the Centre Party, in turn, said that their solution to the problem would be to increase the general tax level of Spain by 10 percent.
A limited free trade zone suggested by the True Finns would mean a huge leap backwards in history. The tax level of Spain, in turn, is not for us Finns to decide.
What does all this mean? It means that we don’t have any real alternatives other than the ones that we already know: Do we or do we not want to stay in the euro?
My answer to this question is a clear “yes”. We do indeed want to stay in the euro. Why? Because we are a country of only five million people and we produce only two percent of the GNP of the European Union. That is a very small fraction of the world’s economy. We all understand that it carries less weight in the decision making of the world’s politics. However, thanks to the Finnish membership of the EU, our influence in international politics has grown tremendously. For those who say that Sweden chose not to be in the euro zone and it has still been doing just fine, I take the view that Sweden and Finland cannot be compared. The economy of Sweden is twice as big as that of Finland and, when we still had it, the Finnish markka was never valued on the international money markets as highly as the Swedish crown. It is clear that it is misleading to say that Finland and Sweden are comparable.
What does staying in the euro mean in practice then? Does it mean sacrifices in our domestic expenditure? Does it mean that the children in schools will have to give up their daily meals or that people in elderly homes won’t have enough helping hands to take care of them? No, it doesn’t. The government budget and financial support for Europe are not as directly linked as some people imagine. Those who say that they are, are not telling you the true story.
However, I have to tell you that I am at least as irritated and angry as most Finns about the current situation in Europe. It is really unfair to support countries which have not been able to take care of their finances as well as they had promised, and with the prudence that we, here in the north, would require.
Spain is one of these countries. In the case of Spain, we have to consider the situation as a whole. In Spain the real estate boom lasted far too long before anyone realized that many of the unsold houses ended up in the hands of banks and brokers rather than in the hands of individuals.
Who should we then support in Spain? The state or the banks? That is a question which is fairly easy to answer. At least for now. It is more reasonable to give financial support to the banks, because it is cheaper for us to try to stem the flow, when the leak is not yet beyond control. The price tag of the support to the state of Spain would be at least 4 or 5 times as high as support given to its banks.
I know that talking about bank aid makes your minds travel back in time to the 1990s, when Finland had its own bank crisis and there was really no one to help us out of that misery. We all remember that. Therefore, I want to stress that in the case of Spain now, it is not traditional bank aid that will be given directly to any bank that asks for financial support. But instead, it is a strictly limited loan that will be given only to those banks that accept the stringent conditions that will come with the money. The conditions of the loan will be so strict that the banks will want to pay it back as soon as possible. The banks will not be getting the money directly for themselves. Instead it will come through an institution (FROB) that has been established in order to take care of the restructuring of Spanish banks and to decide which parts of the banks will be saved and which will not. In the end, the state of Spain will guarantee the loans in case the banks themselves fail to pay back their commitments.
Anybody who has a mortgage or who has borrowed money for any purpose knows that debts cannot be paid back by taking on more and more debt. It does not work that way. In the long run, only sustainable growth, austerity, a shared banking union and new measures against corruption and tax evasion will be the right remedies for the malaise.
As the economic crisis has for a long time captured all the attention of the decision makers in Europe, many of the long term challenges have been sadly left aside. How do we keep work in Europe, as many of the production plants have already been moved to India, China and Brazil? How do we solve the growing problem of youth unemployment or an ageing population? And what will the presence of Chinese banks and investment money in Europe bring to us in the future? How should we react to all this?
These are the challenges that we Finns should be resolving together with our European partners. We do not live in separate rooms. We should not be painting ourselves into a corner, where we can find no way out. The European Union is first and foremost a peace project. Almost 50 years of peace, 50 years of prosperity and 50 years of progress should make us all think of it and be grateful.