The Finnish government told parliament that Helsinki and its Dutch allies would block the euro zone's permanent bailout fund buying bonds in secondary markets.
Euro zone leaders agreed last Friday that rescue funds could be used in a "flexible and efficient manner" to lower government borrowing costs. Their statement gave no further detail.
The euro fell 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 be fraying.
Several previous market rallies after euro zone 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.
- Related post: Postponing crisis? Germany approves EU bailout fund
The German parliament has voted in favor of the EU’s permanent bailout scheme and more lenient budget rules. Chancellor Merkel has been criticized with making a U turn in policy, easing borrowing costs on flagging banks without additional austerity.
- Related Story: Marc Faber: Germany Should Leave Euro and Greece Kicked out
Faber went on to say, “In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”
Faber on the eurozone crisis:
“If you put one or 100 sick banks in a union, it does not change the fact that they’re sick. In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher. I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.”
“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper. ”
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