Monday, April 18, 2011
EU Bailouts Finnished?
While Canadians will go to the polls on May 2nd, Finns went to the polls yesterday and elected a new government. Well, actually they re-elected the existing government... well sort of. The leading party, the centre-right National Coalition Party won the most seats and will form government. How they form that government got a lot more complicated after their former allies the Centre Party lost 16 seats and no longer has the seats to prop up the government. The only real winner on the night were the True Finns who went from being marginal to the third largest party in what can be best described as a pizza parliament. The True Finns are yet another example of the xenophobic neo-nationalist parties gaining in popularity across Europe. Most problematic for the world outside of Finland is that the True Finns hate the EU and positively loathe the bailouts given to EU bankrupts Greece and Ireland. The True Finns want no part of further bailouts and with Portugal and Spain on the rocks, this is worrying because the Euro zone needs unanimity to approve the bailouts. It's a long way from Helsinki to Lisbon. That distance didn't get any shorter this weekend.
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2 comments:
I think there has been a huge backlash against the EU bailouts and one should not totally take the rise of the True Finns as a rise of the far right. After all, their economic platform is in many ways more centre-left than centre-right. Likewise in Germany, the black-yellow coalition has taken a big hit and the Red-Greens have gained for much the same reason. With the economic differences in the EU, the biggest mistake was to have a common currency without a common fiscal policy. You cannot have monetary policy done at one level (the EU today) and fiscal policy at another (the national governments today). Either the EU has to take over fiscal policy of the Eurozone countries or scrap the Euro and return to the legacy currencies. If Greece, Portugal, and Ireland had their own currencies they could have avoided a bailout by devaluing their currencies, something they cannot do now that they are in the Eurozone.
The Social Democrats are as anti-bailout as the True Finns. The only real difference is that the True Finns say it with more racial undertones. A party like the True Finns or the Swedish Democrats or Jobbik in Hungary would be outlawed in Germany.
You are right that there is a major disconnect between fiscal and monetary policy in the EU. However, if the Drachma were still in existence today, it would have suffered the fate of the Russian Ruble and the Thai Bhat: intense speculative devaluation leading to massive inflation and even deeper crisis and frankly, bigger bailout. If you look at what happened in Hungary or Latvia or Estonia when they're economies hit the rocks a couple years ago now, you'll see that their independent albeit somewhat monetary policy gave them little consolation. They were begging for a Greek style bailout, they were ignored.
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