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July 03, 2012 at 06:30 AM
The agreement worked out so painfully during a recent European Union (EU) summit meeting to soothe markets and help Spain and Italy is being threatened. Finland and the Netherlands say they will not support bond buying on secondary markets by the euro zone’s European Stability Mechanism (ESM).
Reuters reported late on Monday that Finnish leaders said the two countries, which take a hard line on the debt crisis, would not approve the measure, which was designed to allow Spain and Italy continued access to markets without continued increases in yields.
Last week Finland had proposed that Spain and Italy should issue covered bonds that were backed by state assets or future revenues. That would allow Helsinki to avoid demanding collateral for bailout loans; however, the measure failed.
Although Prime Minister Jyrki Katainen’s spokesman said the country’s position on the ESM was unrelated to the blocking of the Finnish proposal, Finland’s refusal—along with that of the Netherlands—to sign off on the ESM bond-buying arrangement could make things more difficult.
