Yesterday, Italian Prime Minister Mario Monti denounced unnamed “northern” EU states for taking positions that contributed to spikes in borrowing costs for Italy and Spain.
One of these states was Finland, whose Finance Minister, Jutta Urpilainen, stated that:
“Collective responsibility for other countries’ debt, economics and risks; this is not what we should be prepared for.”
Urpilainen wasn’t just expressing the normal distaste of the profligate by the prudent. Regardless of intention, Finland cannot bail out Italy or Spain, even if it wanted to. Simple math explains why.
According to the CIA World Factbook, Finland’s population is 5.3 million. Were Finland a US metropolitan statistical area, it would rank only #10 – behind Atlanta and just ahead of Boston.
Finland’s GDP is $271 billion ($197 billion at purchasing power parity). More importantly, Finland’s central government tax revenues add up to $136.2 billion.
So far, Spain has asked for a bailout of 100 billion Euros ($125 billion) – an amount equal to 92% of Finland’s total government revenues for 2011. Spain’s ultimate bailout number will surely be higher. Add Italy to the mix and the equation becomes insoluble.
Finland will not bail out Spain or Italy because it could not do so without impoverishing its own population. What is mathematically impossible will not happen.