Finland, Netherlands cast first doubt on eurozone deal

PanARMENIAN.Net - Finland and the Netherlands, the eurozone's most hardline creditor states, cast the first doubts on Monday on a European summit deal designed to save Spain and Italy from being engulfed by the currency bloc's debt crisis.

According to Reuters, the Finnish government told parliament that Helsinki and its Dutch allies would block the eurozone's permanent bailout fund buying bonds in secondary markets, despite an agreement among leaders' last week that the fund could be activated to stabilize markets.

The euro fell, European stocks gave up gains and safe-haven German Bunds reversed losses on news of the Finnish statement, which raised fears that the latest deal which drew a positive initial market reaction could unravel.

Several previous market rallies after eurozone crisis agreements have fizzled within a day or two as investors have fretted about the lack of detail, the risk of delay and national vetoes, or the inadequate size of the rescue funds available.

The 17 eurozone leaders agreed in Brussels on steps to shore up their monetary union and bring down borrowing costs for Spain and Italy, regarded as too big to fail but also too expensive to rescue if they are shut out of markets. They gave few details on the use of the temporary EFSF and permanent ESM rescue funds.

ESM bond buying in secondary markets would require unanimity and that seems unlikely because Finland and the Netherlands are against it, the Finnish government said a report to a parliamentary committee.

The report gave no explanation for the apparent volte-face but EU diplomats noted that a Finnish proposal that Spain and Italy should issued covered bonds, backed by state assets or future revenues, to avoid Helsinki having to demand collateral for any bailout loans, failed to find agreement last week.

Dutch Finance Ministry spokesman Niels Redeker said the Netherlands did not support using the bailout fund to buy bonds on the secondary market and would evaluate purchases case-by-case.