INTRODUCTION
Finland held a parliamentary election on April 17th and the results have stirred up plenty of anxiety among Europe’s worry-worts, and in particular among bureaucrats in the eurozone (the seventeen countries using the euro as a common currency). All previous Finnish governments have been staunch supporters of the European Union. Until now the EU could count on Finland–but a new coalition government must be formed and it is expected to include the True Finn Party, which represents a decidedly anti-EU and Euro-skeptic bloc of voters.
The True Finn Party’s success at the polls indicates a weakening of support for the euro that, depending on what compromises it extracts during the coalition-forming process, may have a very negative impact on the soundness of the euro as a global currency. This is scary because what’s at stake, ultimately, is the future existence of a common currency zone in Europe. This shift in attitude in Finland comes at a critical time, when the terms of a bailout for Portugal are being negotiated. If Finland refuses to go along with the bailout, "the whole support mechanism for the euro could unravel" (1). And the worst case scenario (though rather unlikely) would be severe damage to the EU that might bring about its dissolution.
This election produced "a big, big bang in Finnish politics" (2). As predicted, there was a backlash against the three parties that have been running the show in Finland for decades. Since no party won a majority in Finland’s 200-seat parliament, the party with the most seats, the National Coalition Party (NCP),will need to form a coalition with parties that up to now have been in the opposition. The biggest loser, the Centre Party (whose leader is the current prime minister), had been a strong supporter of the EU. Now it will voice its support as the main opposition party. The True Finns came in third, with nearly 20% of the votes, giving them 39 seats in Parliament, but compared to their showing in 2007, this was a dramatic increase, generally seen as a sign that more and more Finns are having serious doubts about "the European project."
As soon as the election results were announced the leader of NCP tried to reassure his fellow Finns as well as the outside world: since Finns are such reasonable people, "solutions always will be found" (3). Given Finland’s tradition of conducting politics by consensus, it was hope that a coalition, based on compromises, would emerge. There will be compromises–but not on the issue of the Portugal bailout. Today (May 3rd) the breaking news from Helsinki is that the True Finns have rejected the bailout–and no way it could be modified to make it acceptable. Moreover, they are adamantly opposed to the creation by the EU of a "permanent stability mechanism" (i.e. bailout funding agency) (4). Evidently, the True Finns don’t think that jeopardizing the euro, in the long-run, might be detrimental to Finland’s national interests. (Yesterday I thought that perhaps EU and European Commission bureaucrats, as well as euro-leaning economists and financiers, had gotten too worried too quickly? I was wrong.)
The source of all this anxiety stems from the fact that in Finland (unlike other eurozone countries) the Parliament gets to vote on EU policies, including bailouts. So the True Finn Party, with its anti-European Union and especially its anti-euro position, could "roar" if it wanted–and sabotage a bailout. Right now Finland’s pledge to the EU bailout fund is 8 billion euros. The fund total is 440 billion euros ($639 billion), but that amount is expected to increase and, if Spain and/or Italy had to be bailed out, it would have to increase substantially (5). Since any bailout requires a unanimous vote, Finland can effectively veto any proposal. Already, euro countries are thinking about how to get this roadblock. One path would be a series of bilateral agreements though a consensus
During the recent campaign the True Finns said they would block any bailouts. Nevertheless, speaking right after the election results had came out, their leader suggested that they were aiming at changing the terms of Portugal bailout–not totally nixing it. The outgoing prime minister, explaining that the bailout issue is too important for any interim government to decide, announced that he would not put it to a vote in Parliament. Moreover, the incoming prime minister also pledged to get push for tougher loan terms for Portugal. Since the EU wanted Finland’s position to be clear by May 16 (when euro zone finance ministers will be meeting in Brussels), pressure was building on the new coalition partners to resolve the issue. The True Finns still intend to join the coalition, despite their rejection of the bailout. Their position is totally in line with a recent poll in which nearly 80% of the party voiced opposition to loan guarantees (6).
When I first read about the possible European repercussions of Finland’s election--that a party coming in third in an election in a country of 5.4 million–could pose such a threat to the eurozone and perhaps even damage the global recovery--what leapt to mind was "the mouse that roared." This phrase comes from a 1950s satirical novel, The Mouse That Roared, with Cold War themes that were very relevant in the 1960s, when high school teachers encouraged their Boomer students to read it (7). The "mouse" is the imaginary Duchy of Fenwick, a tiny mini-state in the Alps that gets into a spat with the United States and then, with great bravado declares war. Amazingly, by accident, Fenwick’s invading army (a Field Marshall and twenty-odd men) lands in New York and obtains a mighty bomb. Thus, a tiny country manages to intimidate all other countries into accepting its terms (the inspection of all nuclear weapons, a ruse to effectively disarm them). Today, it seems that Finland is roaring, in the context of increasing resentment in the euro zone, where economically stronger countries keen to impose austerity measures on those requesting assistance.
Here’s my general point: Whenever a mouse roars, we ought to tune in and listen to the global channel–rather than dismiss that roar as background noise. We can tune in by asking: What is the global context? What is the "mouse" trying to accomplish by making such a racket? This applies to world history, too, where students taking the AP World History exam are expected to write about the "world historical context." . Whenever historians ignore a mouse that roared or simply do not hear it (because its roar is being drowned out by the roaring of history’s lions and tigers), we may miss a critical piece of the puzzle. This is a vulnerability in the field of world history--where, in my opinion, there is too much emphasis on the numerically, territorially, culturally dominant so-called "civilizations."
So Finland is roaring now--at least the Euro-skeptic portion of the electorate. During the campaign the True Finn message was loud and clear: Stop! We can’t keep bailing out the "squanderers" of the Euro zone (8). But most of those in charge of Finland’s industrial sector don’t agree. They argue that the country’s export-driven economy (one million jobs depend on exports) could be severely harmed by another financial crisis (9). And the Social Democrats (the other coalition partner), though they too would like to modify the plan for Portugal, have a record of strong support for the EU and the euro. Thus, Finnish pragmatism may still win out–if the new government decides, however reluctantly, that rescuing Portugal is in their own country’s national interest. Of course, the two coalition parties favoring a bailout would have to find additional votes–since the True Finns say they won’t vote for it.
Another aspect of the larger context is the anti-immigrant stance of the True Finns, a party perhaps better described as populist rather than right-wing party. Although name "True Finns" seems to echo claims made by the Tea Partiers in the US (we are the true Americans, the real patriots) and by the propagandists of Ivoirité (we are the real, natural-born Ivorians), I’d rather not (yet) jump to such a conclusion . From comments I’ve read I’ve gotten the impression that it is not a party of raving fanatics (aren’t Finns just too calm to rave?). It doesn’t seem so very right-wing by American standards (10). Yet, its stunning gains in this election suggest it may be another harbinger of a European shift to the right, motivated by concerns over immigration policy, the status of immigrant communities, and a failure to sufficiently integrate immigrants into the national milieu. To the extent that Americans are even aware of immigration issues in Europe, their attention is focused mostly on Britain, France and Italy (since the influx from North Africa is in the news). But debates about immigration policies are also a factor in the politics of Sweden and Belgium, too–indeed across much of Europe. As these debates continue, they bring forward nationalistic sentiments that seem to strike a chord with more and more voters (11).
Well, if the right-wing mice raised their voices in the recent election, they were amplified by those of the Euro-skeptics (or vice versa). There are good reasons to think that much of this roaring was in two-part harmony. Just as certain right-wing voices in the US are typically raised in two (or three or four)-part harmony.
In any case the most immediate threat is to the proposed plan to rescue Portugal. Like Finland, Portugal is a small country and in other circumstances it might (or has) played the role of the roaring mouse. Alas, Portugal is in no position to roar back.
Portugal and Bailout Politics
Looking at a map of Europe, it is obvious that Portugal’s size and location put it on the periphery. Geographically, it is on the southwestern edge, a position that, back in the 15th century (when the Atlantic world was opening up), was an advantage. Compared to its larger neighbors Spain and France, Portugal is a relatively resource poor country (this partly explains why it took to the seas five centuries ago). After joining the EU in 1986, it received EU subsidies that transformed its economy.
Is the Portuguese economy really facing a severe crisis? Taking into consideration how quickly Portugal emerged from the financial crisis of 2007-2008 (largely explained by the fact that its banks had not sponsored a housing boom), it is puzzling to see what has happened to its credit rating. With a level of accumulated debt below that of Italy, why should Portugal (and not Italy) have its rating downgraded to the point where its government has had to ask for relief? And, though its budget deficit has been revised upward, to 9.1% of GDP, it is still below that of several other Euro zone countries. Robert Fishman has pointed a finger at speculation and the bias of market fundamentalists among bond traders and credit analysts (12). In any case, the Portuguese sovereign debt crisis might have been prevented (or forestalled) by an EU bridge loan but no EU country was interested in a bilateral loan. The European Cental Bank might have averted a panic by quickly buying more Portuguese bonds.
When Portugal requested assistance from the EU on April 6th, it became the third country to do so, following Greece and Ireland. The European Central Bank and the International Monetary Fund are also participating in the rescue, in the form of loans, for which the estimate is 80 billion euros ($118 billion) over three-years. What brought Portugal’s sovereign debt crisis a tipping point was an impasse in Parliament, reached when a much needed austerity package was voted down for the fourth time. The Socialist government of Prime Minister José Sócrates fell and an election was scheduled for June 5th. But the Social Democrats, who are expected to head a new coalition, also accept the need for deficit-lowering budget cuts (13).
For Greece, Ireland, and now Portugal, aid in the form of bailouts is alarming because it can become a "debt trap." Tough terms, forcing a government to drastically cut spending, can make it impossible for a government to generate growth and so "the pile of debt gets bigger with every passing day" (14). If a country uses it own currency, it can escape by devaluing it. Members of the euro zone do not have this option.
UPDATE: Yesterday (May 3rd) Portugal agreed to an a plan, for aid amounting to 78 billion euros ($116 billion), with terms more favorable than expected (and less onerous than those imposed earlier on Greece and Ireland). Outgoing Prime Minister José Sócrates, pleased with the longer timetable for cutting the deficit, called it "a good deal that defends Portugal" (15). Opposition parties will have to endorse it, but since the terms are reasonable this should not be a problem. The European Union must also approve the plan, which will be discussed at the May 16th meeting. The major obstacle will be Finland, Europe's roaring mouse.
During the bailout negotiations, a critical issue was whether the donors will allow Portugal to defer the targets being set for cutting its budget deficit. Such a deferral would mitigate the economic impact of the necessary austerity measures and, since drastic cuts in both Greece and Ireland have seriously damaged their economies, there are good reasons for agreeing to more lenient terms. In addition, it was feared that harsh terms, stimulating a flow of money out of the country, would lead to the "Zombie bank" phenomenon. This has already happened in Ireland, where investers are putting money in safer external banks because they suspect that the Irish government might suddenly secede from the euro zone (16).
Anxiety and resentments over member countries debts, deficits, and stagnant or shrinking economies will continue to plague the euro zone. The governments of Greece and Ireland, although they have received bailouts, have almost no cash to spend in ways that would help to grow their economies. And there are large deficits and weak economies in several other euro zone countries, particularly Spain, Italy, and Belgium. As Tyler Cowen points out, "All the ways forward look ugly" (17). But choices must and will be made. Will those choices bring forth new growth, stagnation, or a new economic crisis? What’s at stake is the viability of the European Union.
Other Examples
Are there other recent or historic examples that fit the "mouse that roared" scenario? Finding these might be a challenging assignment for students in economics and history classes.
In the euro zone, the governments of Slovakia and Hungary are also critical of bailouts, both passed and pending. Exploring their positions would fit well with any discussion of the True Finns rejection of the Portugal plan.
A closely related topic would be the 2008 Irish referendum in which voters rejected the EU’s Lisbon Treaty, deemed critical for European integration. Since all 27 EU states had to ratify it–before it could be implemented–and Ireland was the only country where ratification depended on a public vote, Ireland’s voters had great leverage. When the Irish anti-EU faction roared, there was angst in Europe. But a second Irish referendum passed late in 2009 and the Treaty came into force on December 1, 2009 (18).
A 2009 editorial in the Washington Times identifes another credible example–this time from Central Asia (19). This region’s spinoff republics (formerly part of the Soviet Union) seem remote (to most Americans) but very occupy strategic positions. From an American perspective its geopolitics are tied closely to the Afghan war, extending southwards to Pakistan and India, but Russia and China are players, too. Kyrgyzstan is one of the regions’ spoorest countries. In 2009, when the Kyrgystan mouse roared, the big lion blinked. That lion was the US, stunned when the Kyrgyzstan government decided to close the US air base at Manas, from which the US was ferrying troops and supplies to Afghanistan. It was fairly obvious that Russia--concerned about American influence in its backyard-- was the instigator here, having just agreed to provide Kyrgyzstan with a $2 billion aid package. In subsequent negotiations the US agreed to pay a much higher rent and to call the base a "transit center" so it remained open. The Kyrgyzstan mouse, with some help from the Russian bear, got a very good deal.
ACTIVITIES
Some of these topics, such as the mock meeting, would be suitable post-AP exam projects (AP World History, Ap/European History, AP/Economics).
EXPLAIN how a parliamentary system works and why Finland’s political parties must now form a new coalition.
RESEARCH: Can you think of other mice that have roared recently? How about historical examples?
SHOW the video "Portugal Seeks E.U. Bailout" (only 2:15 mins.) to introduce the bailout topic and its importance in the larger context of the European debt crisis. Then READ/DISCUSS Erlanger’s article about "Europe’s ‘Debt Trap.’" Why are economists pessimistic about the ability of Europe’s weaker countries to grow their economies? What does Erlanger mean when he says "We have a banking crisis interwoven with a sovereign debt crisis"?
READ/DISCUSS: Students read Cowen’s article about "Zombie banks." ASK: Why does Cowen think creating the euro was a mistake? Does he make points that Finnish voters
DISCUSS news articles that link Finland’s recent election results, the Portugal bailout negotiations, and the implications of both for the well-being of the euro zone. EXPAND the this discussion by asking students to imagine how Finnish voters from different parties might respond to views of Erlanger, Cowen, and/or Fishman in their respective articles.
GEOGRAPHY of European Debt: Send students to "Debt Rising in Europe" to do map work or answer questions based on this set of interactive maps (see Resources). Begin by having students use Map 1 to make two lists: 1) EU countries in euro zone; 2) EU countries not in the euro zone.
RESEARCH: Students (individually or in small groups) research the economic health of countries that are key players in the European debt crisis, their policy options with respect to bailouts, include the option of remaining or exiting the euro zone. Then hold a mock meeting of the European Commission in Brussels, with students representing different countries, to discuss policy issues and options.
RESOURCES: FINLAND
Helsingin Sanomat-- International Edition: http://www.hs.fi/english/
- Short, easy to read news articles–in English
- Archive is excellent resource for all kinds of information about Finland!
- Click "Old Archive" and go back to 2000, then "Old Daily Archive to go back to September 14, 1999
http://www.hs.fi/english/article/True+Finns+reject+Portugal+bailout+/1135265848625
"Poll: Portugal Bailout Splits Finns." Helsingin Sanomat (May 3, 2011):
http://www.hs.fi/english/article/Poll+Portugal+bailout+splits+Finns/1135265848718
http://www.bbc.co.uk/news/world-europe-13107620
"Truly Amazing." The Economist (April 18, 2011): http://www.economist.com/blogs/newsbook/2011/04/finlands_election
"A Suomi Shake-Up." The Economist (April 20, 2011): http://www.economist.com/node/18587287
"Eurosceptic Parties Make Gains in Finland." news24 (April 18, 2011):
http://www.news24.com/World/News/Eurosceptic-parties-make-gains-in-Finland-20110418#
"Finland Leads Rise of the Fair Right Across the EU."
http://www.telegraph.co.uk/finance/economics/8458477/Finland-leads-rise-of-the-far-right-across-the-EU.html
- Recommended for its SIX links to other articles about the European debt crisis
- Link to blog of Carl Bildt (Sweden’s foreign minister)
Daley, Suzanne and James Kanter. "Finland’s Turn to the Right Sends Shivers Through Euro Zone." New York Times (April 21, 2011): http://www.nytimes.com/2011/04/22/world/europe/22finland.html?ref=europeansovereigndebtcrisis
FEATURE FILM DVD: "The Mouse That Roared." (Walter Shenson; Jack Arnold; Roger MacDougall; Stanley Mann; Peter Sellers). Culver City, CA: Columbia TriStar Home Entertainment, 2002, 2003. (Also check the Internet Movie Database: http://www.imdb.com)
RESOURCES: EURO ZONE AND THE PORTUGAL BAILOUT
European Commission: Home: http://ec.europa.eu/
English Welcome: http://ec.europa.eu/index_en.htm
International Monetary Fund: http://www.imf.org
European Center for International Political Economy: http://www.ecipe.org/
Times Topics: Euro: http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/euro/index.html?scp=3&sq=cowen%20euro%20vs%20invasion%20zombie&st=cse
Times Topics: European Sovereign Debt Crisis (2010-)
http://topics.nytimes.com/top/reference/timestopics/subjects/e/european_sovereign_debt_crisis/index.html?scp=2&sq=cowen%20zombie%20banks&st=cse
VIDEO: "Portugal Seeks E.U. Bailout." Reuters Business (2:15 mins). New York Times (April 7, 2011): http://video.nytimes.com/video/2011/04/07/business/100000000763313/portugal-seeks-eu-bailout.html?scp=2&sq=portugal%20bailout&st=cse
NYT INTERACTIVE: "Debt Rising in Europe." New York Times (December 20, 2011):
http://www.nytimes.com/interactive/2010/04/06/business/global/european-debt-map.html?ref=global-home
Erlanger, Steven. "In Portugal Crisis, Worries on Europe’s ‘Debt Trap,’" New York Times (April 8): http://www.nytimes.com/2011/04/09/world/europe/09portugal.html?scp=1&sq=erlanger%20debt%20trap&st=cse
Minder, Raphael. "Bailout for Portugal Will Put Politicans in a Vise." New York Times (April 10, 2011): http://www.nytimes.com/2011/04/11/business/global/11iht-bailout11.html?scp=2&sq=minder%20bailout%20vise&st=cse
Cowen, Tyler. "Euro vs. Invasion of the Zombie Banks." New York Times (April 16, 2011): http://www.nytimes.com/2011/04/17/business/17view.html?scp=1&sq=cowen%20zombie%20banks&st=cse
Armitstead, Louise. "Finland Leads Rise of the Far Right Across the EU." The Telegraph (April 18, 2011):
"Bailout May Ease Portugal Budget Targets, No Consensus Yet." Reuters (May 2, 2011):
http://www.reuters.com/article/2011/05/02/portugal-bailout-idUSLDE7410U420110502
Shorto, Russell. " Marine Le Pen, France’s (Kinder, Gentler) Extremist."
New York Times Magazine (May 1, 2011): http://www.nytimes.com/2011/05/01/magazine/mag-01LePen-t.html?scp=2&sq=shorto%20russell&st=cse:
NOTES
1) Fredrik Erixon, director of the European Center for International Political Economy, as quote in Suzanne Daley and James Kanter, "Finland’s Turn to Right Sends Shivers" (April 21, 2011): see Resources.
2) Jan Sunderland (University of Helsink), as quoted in Louise Armitstead, "Finland Leads Rise of the Far Right," Telegraph (April 18, 2011): see Resources. Confirmed by the observation that it is "a watershed moment in Finnish politics" (news24). To make this post more accessible to students (who might be overwhelmed by too many names) I refer to political parties rather than their leaders. Timo Soini, head of the True Finns, is described as charismatic and fairly moderate relative to others in the party.
3) Quoted in news24 (April 18, 2011): see Resources.
4) "True Finns Reject Portugal Bailout," Helsingin Sanomat (May 3, 2011): see Resources.
5) "Political Situation in Finland Problematic for EU," Helsingin Sanomat (May 3, 2011):
http://www.hs.fi/english/article/Political+situation+in+Finland+problematic+for+EU/1135265848913
6) Terhi Kinnunen, "Finland PM-Elect Says 5 Days to Decide On Portugal," Reuters (April 29, 2011): See "Poll: Portugal Bailout Splits Finns," Helsingin Sanomat (May 3, 2011): see Resources.
7) Leonard Wibberley, The Mouse That Roared (Boston: Little, Brown, 1955). Used paperback editions are still widely available. Translated into Korean (2005, 2010 editions) and Romanian (2009) according to information at www.worldcat.org. DVD of the 1959 movie (see Resources). Also check public libraries for older VHS videotapes (early 1990s). Christopher Segal, The Mouse That Roared (1963), a stage adaptation of the original novel, appears in searches and bibliographies.
8) See news24 (April 18, 2011); also Armitstead, Telegraph (April 18, 2011); see Resources
9) See news24 (note 3).
10) See Historylynx post, "Birther Bigotry–in American and Ivory Coast" (April 29, 2011). Also based on reading online comments, especially on Armitstead, Telegraph (April 18, 2011).
11) Armitstead, Telegraph (April 18, 2011); Daley and Kanter, "Finland’s Trun to Right," New York Times (April 21, 2011); Russell Shorto, " Marine Le Pen, France’s (Kinder, Gentler) Extremist," New York Times Magazine (May 1, 2011); see Resources.
12) For comparative data, based on 2009 figures, see "Debt Rising in Europe" (esp. Maps 2, 5, 6), New York Times (December 20, 2010): see NYT INTERACTIVE in Resources. Steven Erlanger, "In Portugal Crisis, Worries on Europe’s ‘Debt Trap,’" New York Times (April 8); Robert Fishman, "Portugal’s Unnecessary Bailout," New York Times (April 12, 2011); also David R. Cameron’s letter-to-the-editor rejoinder to Fishman, New York Times (April 18, 2011): http://www.nytimes.com/2011/04/19/opinion/l19portugal.html?ref=europeansovereigndebtcrisis; see Resources
13) Raphael Minder, "Bailout for Portugal," New York Times (April 10, 2011):http://www.nytimes.com/2011/04/11/business/global/11iht-bailout11.html?scp=13&sq=minder%20portugal&st=cse
14) Erlanger (see note 12).
15) Raphael Minder, "Portugal Agrees to a $116 Billion Bailout," New York Times (May 3, 2011):
http://www.nytimes.com/2011/05/04/business/global/04portugal.html?scp=1&sq=minder%20portugal&st=cse
16) Tyler Cowen, "Euro vs. Invasion of the Zombie Banks," New York Times (April 16, 2011); see Resources.
17) See note 16).
18) Tom Peterkin, "EU Referendum: Ireland Rejects Lisbon Treaty," Telegraph (June 2008, 2010): http://www.telegraph.co.uk/news/worldnews/europe/2122654/EU-referendum-Ireland-rejects-Lisbon-Treaty.html
19) "Editorial: The Mouse That Roared," Washington Times (February 11, 2009): http://www.washingtontime.com/news/2009/fed/11/the-mouse-that-roared; "In Reversal, Kyrgyzstan Won't Close a U.S. Base," New York Times (June 23, 2009):
http://www.nytimes.com/2009/06/24/world/asia/24base.html?ref=transitcenteratmanaskyrgyzstan
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