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Finland's Parliament approves Portugal bailout

Finland's Parliament approves Portugal bailout

Finland's Parliament on Friday approved a European bailout for Portugal, clearing the way for finance ministers of the wider 17-nation eurozone to approve the rescue plan next week.
In a 15-5 vote with five abstentions, the parliamentary grand committee backed the plan, authorizing Finance Minister Jyrki Katainen to approve the aid package at Monday's meeting of finance ministers in Brussels.
The ministers there will discuss the finer details of Portugal's bailout plan, with each country offering proposals and certain conditions, before rubber-stamping the deal. Because Finland is part of the eurozone, its approval is required for any rescue measures for cash-strapped eurozone states.
That approval was threatened by Finnish politics after a surge in support for the nationalist, anti-bailout True Finns party in the country's April 17 election. On Thursday, the True Finns pulled out of government formation talks saying the party could not be part of a government that backs EU bailouts.
Finland's two largest parties, meanwhile, had agreed on their position on the bailout, making the outcome of Friday's vote predictable.
The small Nordic country set up a number of preconditions for the plan, however. It wants Portugal to keep private investors from pulling their funds out of the country and for it to sell state assets to ensure the European Union loans can be repaid.
Also, for any future bailouts, Finland wants a country asking for bailout loans to set up collateral, such as stakes in national companies.
The EU welcomed the Finnish vote.
European Commissioner for Economic and Monetary Affairs Olli Rehn described it as a "responsible decision" which would strengthen Europe.
"It ... will contribute to safeguard financial stability in Europe and in Finland," Rehn told reporters in Brussels. "With regard to the Finnish proposals, we consider them constructive and we'll study them in detail with the view of discussion ... next Monday and Tuesday."
Though Finland's blessing for the (EURO)78 billion ($112 billion) bailout by the EU and International Monetary Fund eases Portugal's immediate concerns, the Portuguese are bracing for at least two years of recession.
Portugal's National Statistics Institute said Friday the country has already slipped into a double-dip recession, with the economy contracting 0.7 percent in the first quarter of this year largely due to lower private and public spending as tax hikes and pay and welfare cuts bite.
The economy grew 1.4 percent in 2010 but shrank 0.6 percent in the final quarter. The IMF predicts Portugal will contract 2 percent this year and next.
The downturn will make it harder for Portugal to escape its financial woes, denying it revenue to settle its debts.
A slowdown was widely expected because Portugal has enacted deep cuts to ease its high debt load, but the contraction was steeper than analysts had predicted.
Interim Prime Minister Jose Socrates, who is standing for re-election next month, said the grim economic figures were expected.
"It's the price we have to pay to get our public finances back in order," Socrates told reporters.
He said a rise exports during the quarter was cause for hope.


Updated : 2021-10-19 19:04 GMT+08:00