Euro zone finance ministers will discuss Ireland’s debt situation at a meeting on Tuesday amid reports some EU countries are keen for Dublin to quickly tap EU emergency funds to calm markets and stop debt concerns from spreading to other countries, like Portugal.
“Finland strongly opposes the German position that the mechanism should be used just to make the markets calm down,” said one euro zone source familiar with Finland’s position. “The mechanism wasn’t created for that purpose.”
Since decisions among finance ministers over activating the European Financial Stability Facility (EFSF), which Ireland may need to access, have to be taken unanimously, Finland’s view counts as much as the other 15 members of the euro zone.
Finland’s staunch opposition to pushing Dublin into asking for help is partly based on its belief that the rules must be strictly adhered to but also out of domestic political concerns — there is an election in Finland next year and there is popular opposition to more bailouts.
“Finland is already supporting Iceland, Latvia, Greece and, who knows, possibly Ireland and others,” said a Finnish EU source who spoke on condition of anonymity.
“The government will be politically dead if we accept something that is unacceptable to the average Finn. There is no way of explaining it to the average Finn that we are paying all this money but don’t know when it’s coming back.”
As well as opposing Ireland getting quick access to the EFSF — the Irish government is fully funded until mid-2011 and does not immediately need financing help — Finland opposes Ireland tapping the EFSF or other EU mechanisms to help its banks.
One euro zone source said that if Ireland asked for help in order to bail out its banks, then it should be forced to put up collateral against any loans.
The source said Ireland’s government had assets worth over 100 billion euros which could be securitised and used as collateral against an EFSF loan if one was requested.
Martti Salmi, a ministerial adviser to the Finnish finance minister, said: “The rules on these two aid systems — the EFSF and the EFSM — are unambiguous, the country must commit to a strict adjustment programme, which will remove the original cause.”
The European Financial Stability Mechanism, is a 60 billion euro fund overseen by the European Commission that can also be tapped to provide financial assistance to EU member states in emergency conditions.
Euro zone finance ministers are expected to begin their meeting at 1600 GMT with Ireland the main point on the agenda, but the situation in Portugal, Greece and Spain also under discussion.