By PES President, Poul Nyrup Rasmussen and Jutta Urpilainen leader of the Finnish Social Democrats

The last 12 months have been tough on the Euro zone. Debt problems due to financial market speculation and partly irresponsible financing have taken Greece, Ireland and Portugal to the brink of insolvency. The greed crisis has taken its toll elsewhere in Europe as well in the form of unemployment, growing mountains of debt and loss of morale alike.

However, it is important to notice that the financial troubles are not caused by the Euro… It all began in the USA – a country that does not use the Euro but the dollar. In Europe, the crisis first struck Iceland, a country that has the króna as its currency, not the Euro. Underlying the problems is, above all, the long-term, reckless risk-taking of investors and banks operating in the financial market.

Social Democrats have a responsible attitude to handling the European financial crisis. At the same time, our stand toward advocating the taxpayers’ interests is responsible. It is imperative that investors and banks bear their responsibility in the crisis.

When Greece and Ireland were supported, the rescue efforts focussed on the banks and investors who have large claims in these countries. We must not let banks fail in the future, but we must also remember that if the countries’ debt loads are not made more reasonable they will not get onto a new path of sustainable growth.

Making the debt loads more reasonable requires, for example, lengthening the loan periods. Effective, functioning and fair solutions are needed, where rehabilitating the economy is combined with sustainable growth, strengthening employment and social justice. In practice, building these packages requires that also the investors bear their responsibility.

Now that the lengthening of the loan periods for Greece and lowering the interests for Ireland are being negotiated, these are, actually, debt-restructuring measures. The problem is just that the debts of the taxpayers are being restructured, but private investors are outside of the restructuring.

The Conservative approach to debts in the private sector is compounding the problem. Our progressive approach emphasizes fair burden sharing. Our approach is both economically responsible and socially fair. Debt restructuring is necessary but our approach ensures repayment, but at acceptable interest rates.

A permanent crisis fund is a step forward. Social Democrats in Finland and other EU countries support its realisation. In utilising the temporary crisis fund that precedes it, a more balanced remunerative system must be used when it comes to the support packages. The Portuguese package must be such that the country can get back on its feet and pay its debts.

Alongside acute crisis management, it is important to prevent the formation of new bubbles. European Social Democrats have for years taken initiative to implement a financial transaction tax on the EU and global level. This spring, we have finally got support in this from the EU right wing. The financial transaction tax must now be implemented, not investigated, as was the case once again in the March summit. The financial transaction tax is a good way to fairly and sustainably collect revenue for reviving national economies in the EU countries and prevent speculative bubbles in the financial market.

The co-ordination of the financial policy of the EU and Euro zone requires strengthening. First and foremost a commitment must be made to follow agreements. Particularly for a small open economy like Finland, it is important that the possibility for cyclical flexibility remains in the agreement.

Managing the problems that are shaking Europe can be summarised as ‘what kind of a Europe we want?’ Social Democrats want a Europe of people, a safe Europe, and a Europe where the market is not the master.