Rocking The EU-boat

The faith of Portugal-bailout by EU is now in the hands of these three Finnish political figures. One of them OKs the rescue package, one of them said NO to all kinds of bailouts (for any country) and one of them isn't quite sure.

Here they are from right to left in terms of political views:

Jyrki Katainen

Jyrki Tapani Katainen (born October 14, 1971) is chairman of the Finnish National Coalition Party (Kokoomus) and the Finance and Deputy Prime Minister of Finland. He wants to bail out Portugal and has been the Finance Minister in charge of previous EU-bailouts. He doesn't like it, but he says that it is the lesser of two evils (the other being another EU/World-wide financial panic).

source: Wikipedia

Timo Soini

Timo Juhani Soini (born May 30, 1962) is a Finnish politician, and co-founder and current leader of the True Finns party. The party combines left-wing economic policies with strongly conservative social values. They are basically against EU and not surprisingly against any EU-level bailouts. Just a few months ago, the party was a rather small player, but is now third biggest party and very close to #1 (Finnish National Coalition Party) and #2 (Social Democratic Party). It will be extremely hard to not to let these guys to next cabinet.

source: Wikipedia.

Jutta Urpilainen

Jutta Pauliina Urpilainen (born 4 August 1975 in Lapua) is the Chairman of the Social Democratic Party of Finland (SDP). She is the joker in the deck. It is basically up to Social Democratic Party whether the EU-bailouts get a green light from Finnish parliament. So far SDP have demanded that investors of Portugal and other EU-countries in trouble will be made partly accoutable. However, it seems that there is no way to re-negotiate the already negotiated EU-bailout packages. Therefore, it remains to be seen what SDP and Urpilainen does.

source: Wikipedia

Jyrki Katainen have been forced to invent an ad-hoc process to get the Portugal bailout approved. The ex-Prime Minister Mari Kiviniemi has said that they won't advance the matter and she will not present anything to Finnish parliament regarding bailouts. Her party lost big time in the election - a lot of their seats in parliament went to True Finns. The position taken by Kiviniemi and Soini puts Jyrki in a tough spot. The solution that he came up is to try to get approval from each party separately. Without the support of Jutta and SDP it looks like he will not get majority behing the package.

What happens if Finland does not support the bailout is unknown.

The Helsingin Sanomat newspaper listed today some pros and cons if Finland rocks the EU-boat big time. The pros include:

• People living in EU and Portugal in particular will remember that Finland is part of EU.
• Finnish citizens have been wining for a long time that why Finland needs to always be the model member of EU. Not anymore.
• EU gets slap in the wrist and reminder that the national parliaments still have a lot of power.

OK. Maybe so, but the list of cons is a long one and at the extreme end of it looms another financial panic. The cost of yet another panic would by likely be much larger than any foreseeable cost of bailouts.

By 13th of May we will know.

I am glad I have put together a fairly defensive portfolio. At the moment I am also letting cash to pile up.