Finland wants two-tier euro zone with more power for AAA countries
With sovereign interest rates in the euro zone rising, Finland is feeling the contagion effect despite being the only country in the euro zone except tiny Luxembourg which is both AAA-rated and meets all of the Maastricht Treaty requirements. The question is how to solve this problem going forward.
Last week we learned of German plans to change the European Constitution for greater fiscal integration by 2013. The goal was to give countries like Germany and the Netherlands where government deficits have been low, a say in the internal national budgetary debates in other countries where government deficits have been higher. Having seen this move by the Germans, the Finns have a proposal of their own.
Belgian daily De Standaard writes:
Prime Minister Jyrki KATAINEN stated on Finnish television broadcaster MTV3 that he agreed with the idea launched by the Finnish Minister of European Affairs Alexander Stubb in a speech at the College of Europe in Bruges and in an interview with the Financial Times.
AAA countries have managed their finances well, or so the argument goes. "A country that is not AAA-rated is not best placed to advise on public finances," said Stubb. He thinks that the six eurozone countries with a AAA rating can form a core within the 17 eurozone countries.
The euro countries with the highest ratings are France, Germany, Austria, Netherlands, Finland and Luxembourg.
This proposal is completely unworkable and is indicative of the type of recrimination that has become commonplace within the euro zone. I see this proposal as more evidence that a 17-member euro zone will not last. As the situation deteriorates, we should anticipate more proposals of this sort – and an equally nationalist response from the periphery. Some countries will exit rather than allow this kind of abrogation of national sovereignty.