While Mario Draghi is busy putting supports under the Euro and Germany is seen as the country that will have the final say, efforts to shore up the euro might be scotched not in Berlin but in Helsinki. It appears that austerity-minded Finland might have the most to lose from a pooling of sovereign debts. Figures show that the combined gross debt of euro-area countries will peak at 91% of GDP next year, when the ratio in Finland will be just 53%, the lowest of any euro-zone country other then Estonia and Luxembourg. After Japan and Italy, Finland has the most rapidly aging population among rich countries, so it is wary of adding to its debts.
recovered from a nasty banking crisis in the 1990s through their own
efforts, the Finns are hostile to bail-outs. Finland might also have least to gain from keeping the euro. Its banks unlike those of France and Germany have little direct exposure to the euro zone’s
troubled periphery. Its
economy is less integrated into the euro zone than those of other
northern countries such as the Netherlands. Only 31% of Finnish
exports go to other euro-zone countries. Five of Finland’s seven biggest foreign markets
lie outside the euro zone. Its biggest supplier is Russia and its
largest single customer is Sweden, whose economy is growing more quickly
than Finland’s, another neighbor, Norway
is also doing well.
The Finns while fed up with being asked to suppoert
Greece and the rest cannot have missed the fact that their nearest neighbors
seem to be thriving outside the euro. This being said, the Finns could still be dragged by the export dependent Germans
into some form of grand bargain that involves pooling debts. Public
opinion is still in favor of staying in the euro, because an export driven economy always needs outside markets. Exports
make up 50% of Germany's GDP, this makes Germany very vulnerable to
events outside its borders like a sudden property bubble bust in China. Germany is at the mercy of its markets, and that is never a good place to be.
Finland’s finance minister, has said that her country would “not hang itself to the euro
at any cost” and that it would not be prepared to shoulder the debts of
other states. More recently Finland's foreign minister revealed that the country had made contingency plans for the break-up of the
euro. If a grand bargain on the sharing or shouldering the debts
of indebted partners is ultimately required to keep the euro together, the Finns could block
it. Some think a Finnish exit from the euro
is more likely than that of Greece, this would just put more pressure on other members of this "difficult" alliance. In reality Finland is not the only country that might feel the cost of paying for the failures of their neighbors sins, a burden to great.
Footnote; Below is a more recent post on other problems concerning the future of this troubled currency.