Most discussions of friction within the euro zone revolve around Germany. Either mighty Germany lends a hand to stragglers like Spain and Italy, the logic goes, or the euro disintegrates. Somewhat understandably, most Germans aren't thrilled with this choice.
But it's worth noting that Germany's not the only wealthy country in Europe facing this trade-off. Finland is another euro member with sterling credit and low debt. The country is risking as much as 5 percent of its GDP on the euro bailout fund. And some Finnish politicians don't sound particularly thrilled with the prospect of propping up Spain and Italy indefinitely. Here was the country's finance minister, Jutta Urpilainen, on Friday:
"Finland is committed to being a member of the euro zone, and we think that the euro is useful for Finland," Urpilainen told financial daily Kauppalehti, adding though that "Finland will not hang itself to the euro at any cost and we are prepared for all scenarios."
"Collective responsibility for other countries' debt, economics and risks; this is not what we should be prepared for," she added.
In particular, Urpilainen opposes the idea of a full continent-wide "banking union," in which Finnish depositors would essentially have to pay extra to insure rickety banks in, say, Spain. Mind you, this is what the United States does — when the FDIC paid $10.5 billion to rescue Florida's banks after the housing bubble burst, the money came from fees levied on banks and depositors across the country. For whatever reason, Californians and New Yorkers have been amenable to this set-up. Finns, it seems, are more leery.
Now, to be clear, a Finnish exit is not even close to imminent. Urpilainen's spokesperson was quick to clarify her remarks: "All claims that Finland would leave the euro are simply false." So let's not get carried away. But as Nouriel Roubini argues at length, Finland has plenty of incentives to leave the euro zone:
First, the other Nordic countries are outside the [euro zone] and/or the EU and are doing fine economically and otherwise. Norway and Iceland have never joined the EU: The former has remained a success story as a resource-based economy; the latter suffered a severe financial crisis driven by the popping of a massive real estate bubble, but so did members of the EZ such as Ireland and Spain. Denmark opted out of EZ membership and is semi-pegging its currency — the Danish krona — to the euro. Sweden was supposed to join the EZ, but it never did and isn't likely to join any time soon. Since none of the other Nordic economies are part of EMU, what are the benefits of Finland remaining a member?
Second, if Finland were to exit the EZ it might also be forced to exit the EU; however, it could keep most of the benefits of EZ and EU membership without any of the costs.
The biggest obstacle, however, is that a Finnish exit from the euro could prove economically crippling. In March, a report (pdf) from Helsinki-based GnS Economics found that "euro area membership has not led to major economic benefits" for Finland. Oops. And yet, the authors note, that doesn't mean that Finland should leave the euro right now. A Finnish exit would likely lead to a collapse in exports, as its new currency rapidly appreciated. Here's the report's conclusion:
If Finland exits now, it would lead to a fall in the export that, combined with all the associated costs, would lead to diminished economic growth at least in the short run.
However, if the composition of the euro zone changes, Finland should reassess her position.
In other words, a Finnish exit will pinch! (It might also lead to the unraveling of the euro, as Finland is one of only four countries left with a AAA credit rating to prop up the euro zone bailout fund.) But if Finland keeps getting pressed to shore up countries like Greece and Spain and Italy, the report suggests, then it might be time to reconsider. That sounds similar to what Urpilainen's saying. At the moment, Finland's government is pro-euro. But as both Roubini and Matt Yglesias explain, there's a strong anti-euro contingent in the country, and the mood could conceivably shift in the future.