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PM warns of "cold winter in middle of summer" for eurozone

Jyrki Katainen and Olli Rehn have both strongly defended the decision to approve a eurozone rescue for Spanish banks.

Jyrki Katainen
Pääministeri Jyrki Katainen (kok.) pohjoismaiden pääministerien kokouksessa Lofooteilla, Norjassa. Image: Yle

Prime Minister Jyrki Katainen says that all the other alternatives are all worse.

“The markets are frightened about how Spain will manage to recapitalise its banks. The problem must be removed so that the entire country does not get into trouble,” Katainen told Yle on Sunday.

Speaking during a Nordic prime ministers’ meeting in Norway’s Lofoten Islands, Katainen declined to speculate on how much the Spanish support might cost Finland.

“No one has made that estimate yet," he said. "It depends on how much recapitalisation the Spanish banks need. The Spanish economy is about twice as large as that of Ireland, Portugal and Greece together. If the banks bring down Spain then we can be sure that a cold winter will begin in the middle of summer, including in Finland.”

Rehn: An important step

Finnish European Commissioner Olli Rehn also told Yle on Sunday that he backs the decision. 

"Certainly it's one important step toward ensuring the stability of the eurozone and...thus the basis for growth and employment," said Rehn, who is Vice President of the European Commission responsible for Economic and Monetary Affairs and the Euro.

He said there will be no decision on which fund the rescue money will be taken from until it is clear "how much and what kind of financial support Spain needs and with what kinds of conditions."

On Saturday, Finance Minister Jutta Urpilainen said that Finland will ask for guarantees if the funds are taken from the European Financial Stability Facility, the eurozone's temporary rescue fund.

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