The eurozone crisis and the summits convened to find solutions have placed highly technical and complex financial market concepts in the public domain. Confusion often arises when politicians and technocrats discuss these intricate issues.
Following last week’s EU summit in Brussels, Prime Minister Jyrki Katainen said that Finland opposes using the permanent rescue fund -- the European Stability Mechanism or ESM -- to purchase bonds on the secondary market. In essence it means that while Finland has no problems with using the fund to help states in need of cash by buying government-issued bonds, it does not want the fund to purchase the bonds once they have been sold on to investors.
European Commission vice president Olli Rehn later said that the ESM already had the option of buying from the secondary market. The contradictory statements have left ordinary citizens puzzled.
Parliamentary researcher Ville Pernaa told Yle the apparent conflict can be explained by the fact that both men are speaking from different perspectives.
“They are speaking with different hats on. Olli Rehn represents the Commission and speaks from the perspective of a European-wide player. Jyrki Katainen is the prime minister of a national administration and champions national political policies and goals,” Pernaa explained.
Different positions, different statements
Pernaa added that the current discussion is confusing because politicians give statements that play to national audiences after summit meetings conclude.
“There are great conflicts nationally and inside the euro area over which crisis management measures to emphasise. Very few want to leave the negotiations and admit defeat, and because of this we get these statements skewed to different positions,” he noted.
The researcher pointed out that Finland’s current government programme has laid down a strict position on euro economies that have run into trouble.
“Nationally we want to see how well the prime minister upholds the rigid government programme and how he can adapt it in practice. The concern on the European level is the future of the euro and its survival. So there are big stakes in both arenas,” Pernaa said.
He noted that practical use of the ESM is different from euro members’ chosen political policies on when and how it can be used.
In principle, the use of the ESM to purchase bonds from investors on the secondary market would require a unanimous decision on a case by case basis. In extreme emergency cases, the fund could be deployed if 85 percent of members support it. In such a case, countries such as Finland and the Netherlands that oppose the practice still could not prevent it.
Pernaa said however that there is still no clear definition of an emergency case, or even when members should abandon unanimity in favour of the qualified 85 percent majority vote.
It’s still not certain whether the Spanish bailout would qualify as an emergency case. At the end of the day, Pernaa said, that would be a political decision.