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Finland wants more unity in crises
Finnish president says more cooperation will provide security against wayward economies.
Last Modified: 10 Jun 2010 13:57
Halonen, Finland's president, said that improvements to international
systems have only taken place during times of crisis

European Union finance ministers have agreed to establish a fund of about $520bn for eurozone members laden with debt, proposing an easy theoretical consensus on solutions for suffering economies. Money.

However, in a regionally integrated and globalised world, the methods needed to stop economies from absconding and putting others under threat are harder to agree upon.

Talking to Al Jazeera recently, Tarja Halonen, the Finnish president, said that there is a need for reform.

"There are weak points in globalisation and in order to make it more stable, in order to make it more fair, we have to make also some reforms.

"But in a very human way steps forward have only been made when there has been a crisis. And this behaviour – reacting only when there is a crisis – is international."

'Greek bushfire'

A debt crisis in Greece - with similar concerns for Portugal, Spain and Italy - have sparked a dearth in confidence in the eurozone from markets, pushing down the value of the euro and up speculation that Europe's single monetary union is fit to implode.

These fears have been little assuaged by Germany, Europe's biggest economy, providing a reticent response to bailout its more free spending allies.

There are also worries outside of the eurozone and European Union over Greek economic instability. For example, reduced demand for Greek bonds has led to a slump in appetite for developing economies' assets.

Halonen said that rather than a reaction against interdependency in which, for instance, protectionism is imposed against imbalances in spending and debt, greater cooperation along many lines is necessary.

She said that Finland will do all it can to stop what she calls the "Greek bushfire", but beyond that what is needed is "broad international partnership".

"It should be not only the regulations, the limits, the minus, the plus, the deficits but also the guarantees that you are realistic in what you are planning."

She adds that such transparency should extend into other areas: "It is not enough to say that we have free trade, we have to have fair, free trade, that makes for real competition."

For a small economy with a high dependency on exports - and thus greater exposure to currency fluctuations - the push against retrenchment could appear antithetical.

Policy harmony

Yet, despite confirmation from 27 European finance ministers on Tuesday that the safety net will be set up, securing harmony on economic policy and its synchronisation has been elusive.

The group did agree to greater oversight on national budgets and stricter regulations on the falsification of economic data.

Potential sanctions for those economies overstepping advisories are not yet confirmed.

Greece hid the extent of its multi-billion dollar debt to the point where it was almost too late to be saved.

It subsequently received almost $150bn from the EU and International Monetary Fund (IMF) to help pay for its debt of about $400bn.

The UK also has a $225bn debt and Spain, Portugal, Ireland and Italy have announced austerity measures to reduce their deficits.

Finland itself was hit hard by the global economic crisis, with its export-led economy damaged by decreases in trade.

It came out of recession in the second half of last year only to fall back into a downturn in the first quarter of 2010, contracting 0.4 per cent versus the previous quarter.

This came after being rated as the sixth most competitive economy by the World Economic Forum in 2009.

Such figures put into doubt the viability of the European social model - crudely, economic growth alongside inclusive social progress. The rising pressures of aging populations - as in Finland - and immigration will only put further stress on government spending needed to finance such a system.

Renewing resources

Yet, Halonen asserts that while entrepreneurship gives dynamism to democracies, the European social model "is the only way to survive".

"If we don't take a quality responsibility for renewing our resources, which means health, education, and so on we will be in trouble," she said, stating that a progressive taxation system, particularly on consumption, is needed to ensure this.

"You try your best as an individual but we take responsibility in corrective ways how to renew the resources."

Finland plans to increase its traditionally high welfare spending this year.

After meetings this week, Herman Van Rompuy, the EU president, said that the eurozone nations were in a position to make "rapid progress" on controls on budgets and monitoring of economic indicators.

There was also said to have been agreement on the sharing of national policy initiatives and objectives within the wider European Commission before they are finalised - although the UK said that it would only provide information already presented to its parliament.

Halonen believes that such moves in regional and international governance will help deal not only with economic issues but also problems including climate change and the controversy over Iran's nuclear programme. The US disputes Tehran's claim that the programme is simply for peaceful energy purposes.

On the economic side, securing such coalescence in what can also be viewed as a competitive environment, and during times of economic crisis, may prove difficult.

As Halonen said, it is much easier to cooperate when times are good.

Source:
Al Jazeera
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