People queue outside a social security office in Lisbon on Wednesday. RAFAEL MARCHANTE/REUTERSRAFAEL MARCHANTE/REUTERS/Reuters
The European Union's hard-fought push to bail out Portugal cleared a major obstacle on Wednesday, but patience for the region's weakest links is wearing thin.
Finland's governing National Coalition announced on Wednesday it had secured the support of the Social Democrats, the country's second-largest party, to back the €78-billion ($106.4-billion) rescue package. It is a major victory for the EU, which requires unanimous approval from its member states before it can move ahead with the lifeline.
But that victory does not spell the end of Finnish resistance to the EU. The populist True Finns, a fierce critic of the EU and financial bailouts, rocketed out of obscurity in last month's Finnish election to become the country's third-largest party and a serious threat to the nation's Portuguese rescue plans. Now, with the True Finns' involvement either as a member of the ruling coalition or as a strong opposition, Finland will almost certainly be a more reluctant player in future bailouts.
And even as the EU won Finland's conditional support, fears are spreading that other nations will not follow suit, causing broader policies aimed at solving the euro zone's debt crisis to come undone.
Indeed, the resentment that fuelled the True Finns' dramatic ascent isn't limited to Finland. Rising public discontent with bailouts is fuelling a surge in anti-EU sentiment that could frustrate efforts to avert complete financial disaster in the euro zone. The True Finns' success came on the heels of gains by populist, often anti-immigrant parties in Sweden, Denmark, the Netherlands, France, and Austria. Their messages, though tailored to individual electorates, share common themes: a growing resentment of financial rescues and a distrust of an EU "elite" in Brussels.
"There's a perfectly predictable and logical geographic pattern to it," said Jonathan Loynes, chief European economist for Capital Economics. "It's strongest in Northern European economies, which are doing pretty well and which are being called upon to come up with funds to support the weaker southern European economies. That's exactly where you expect the resistance to be greatest."
Some of the biggest electoral wins for populists have been in the Nordic nations, where skepticism of the EU and the single currency has always been strong. Only 52 per cent of Swedes voted in favour of joining the EU in 1994 and the country voted against adopting the euro during a referendum in 2003. Norway and Denmark have both stayed out of the single currency zone with opinion polls generally showing a strong resistance to membership.
Finland was always the exception. Though only 57 per cent of Finns voted to join the EU in 1995, a succession of coalition governments provided staunch support for the union. But the bailouts in Greece, Ireland and now Portugal have exposed old divisions among the Finnish people, observers say.
"Finnish voters have always been reasonably skeptical, but all their political parties had established a consensus on the direction of European policy," said Nicholas Aylott, professor of political science at Sweden's University of Sodertorn. "Discontent with the apparent inability or disinclination of any party to reflect this Euro-skeptical position has sort of bubbled over in this election and stayed with the True Finns."
Finland has committed to guarantees of €7.9-billion for the European Financial Stability Facility (EFSF) and €12.58-billion to the permanent European Stability Mechanism that is to be launched in 2013. It gave a €1.48-billion loan to Greece, and Finnish Finance Minister Jyrki Katainen has said the country would have to guarantee an additional €1.2-billion of the Portuguese bailout.
The sums are smaller than those committed by other larger nations, but enough for True Finns leader Timo Soini to insist the Finnish people are being "milked" and to insist bondholders take a haircut.
"If I go to the horse track and I bet the horse and it doesn't win, I pay," Mr. Soini said in an interview. "I can't go to others and say you have to pay because I lost. That is the market economy. In the long run if you take the risk out of society, nothing will work."
Finland's battle has thrown the spotlight on how easily the euro zone's plans to solve the debt crisis could fall apart.
"The current stability mechanism is a fragile structure based on the unanimous consent of all euro zone members to bail out other countries," said Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels-based think tank. "At the end of the day it could come back to Germany and a couple of other countries to put in even more money in order to save Portugal."
That scenario would likely add fuel to the fire in Germany, where critics have characterized the EU as adrift, on its way to becoming a "transfer union" in which wealthy northern countries like Germany prop up their weaker neighbours.
Discontent with euro zone rescue efforts is increasing in mainstream political parties as well, analysts say. Though no single populist party has emerged in Germany, members of the Free Democrats, the junior party in Chancellor Angela Merkel's ruling coalition, are pushing for new rules that would require any future bailouts to win a majority vote in parliament.
"Even if Finland itself refuses to contribute, its contribution is pretty small, so that's not going to blow a hole in the system," said Mr. Loynes of Capital Economics. "But if opposition in the likes of Finland hardens up opposition in the likes of Germany, then that becomes much more important because Germany is clearly the major contributor to these bailout facilities."
Public opposition has already placed constraints on Ms. Merkel, whose popularity has been dented by the continuing debt crisis, he added.
"It's not just about whether or not you see a sudden surge in support of unelected right-wing or even fringe parties. It's more about the general constraints that are now starting to exert themselves on elected governments."
Among Europe's weaker member states, public resistance is also building to the austerity measures imposed by the EU and the International Monetary Fund in exchange for financial assistance. The Portuguese government fell in March after opposition parties spurned measures designed to avoid a bailout. And Ireland's new government campaigned largely on its promise to renegotiate austerity measures imposed by Brussels as part of that country's bailout deal.
As the pressure for more stringent conditions in exchange for financial rescues rises in Germany and other reluctant sponsor countries, so could the potential for more severe backlashes from the countries accepting them.
"If you asked most people a year ago would the euro zone split up, they would say that it wouldn't primarily because of the political willpower to hold it together," Mr. Loynes said. "But all of this means that that assumption is looking rather less valid than it was 12 months or so ago."
Special to The Globe and Mail