For whom the bell tolls – the eurozone prepares for break-up

17 August, 2012 at 09:53 | Posted in Economics, Politics & Society | Leave a comment

Finland’s foreign minister Erkki Tuomioja warned yesterday that the country is preparing for the break-up of the eurozone:

The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount and has said it will not tolerate further bail-out creep or fiscal union by stealth.

“We have to face openly the possibility of a euro-break up,” said Erkki Tuomioja, the country’s veteran foreign minister …

“Our officials, like everybody else and like every general staff, have some sort of operational plan for any eventuality.”

Mr Tuomioja’s intervention is the bluntest warning to date by a senior eurozone minister …

“But let me add that the break-up of the euro does not mean the end of the European Union. It could make the EU function better,” he said, describing the dash for monetary union in the 1990s as a vaulting political leap in defiance of economic gravity. Finland has emerged as the toughest member of the eurozone’s creditor bloc as it tries to hold together a motley coalition. It has insisted on collateral from both Greece and Spain in exchange for rescue loans …

Like other member states, Finland has a veto that could be used to block any new bail-out measures. However, unlike some states, its parliament would have to approve each future measure of the eurozone rescue, including a full bail-out of Spain.

The issue of euro break-up may come to a head in October as EU-IMF Troika inspectors report back on Greek bail-out compliance. Pleas from Athens for two extra years to stretch out its austerity regime have run into fierce resistance from creditor powers …

Critics say the Greek deal set a fatal precedent, triggering further capital flight from Spain and Italy. Mrs Kumpula-Natri – chairman of the Finnish parliament’s Grand Committee on Europe- said Finland can be pushed only so far. “There is a feeling on the street that there has to be a limit. I can’t say whether it is 10% of GDP, or what. It’s not written. But it is obvious that a small country can’t help big countries eternally.”

The Telegraph

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