Reuters :

Finland’s euro-skeptic bloc is poised to form a government with the pro-Europe National Coalition led by Finance Minister Jyrki Katainen after voters used yesterday’s election to protest against funding bailouts.

The True Finns, whose leader Timo Soini says taxpayers shouldn’t have helped rescue Greece or Ireland, jumped almost 15 points to 19 percent, the Justice Ministry said. Katainen’s National Coalition won 20.4 percent to become Finland’s biggest party for the first time. Prime Minister Mari Kiviniemi’s Center Party got 15.8 percent and the Social Democrats, which also opposed bailouts for Greece and Ireland, won 19.1 percent. Kiviniemi will lead her party in opposition after its “huge defeat,” she told broadcaster YLE.

“They could not leave the True Finns out of government after this landslide,” said Tuomo Martikainen, professor emeritus in political science at the University of Helsinki, by phone. “It would be making a mockery of democracy.”

“Finland’s government will demand new negotiations over the package or block it,” Martikainen said. The True Finns and the Social Democrats “would lose face in Finland if they just approved the financial aid,” he said.

€ CAVEAT EMPTOR …

How Europe chooses to deal with the problems of the countries on the edge, among them Greece, Spain, Portugal and Ireland, may determine the future political shape of Europe, and the future of the euro itself.

World markets sank Thursday in the face of signs that skittish investors were growing more fearful of lending to Portugal. That country had to scale back a short-term borrowing plan, something Europe is not used to seeing.

If investors were to walk away, or demand truly exorbitant interest rates, that would put pressure on France, Germany and others in the euro zone to decide just what they would do. Would they bail out their troubled neighbors? Or would they simply allow them to default — an outcome that would have major repercussions for Europe and financial markets worldwide?

For a long time ( 10 years aprox.)  optimistic forecasts said  that European countries, faced with the unavailability of currency devaluations, would liberalize their economies to make them more competitive but that proved to be wrong.

If anything, the opposite happened. A common currency, with closely linked interest rates, made it possible for countries to postpone changes, or to try to do them so gradually that they made little difference.

It is not easy to persuade politicians to take steps that are likely to lead to them being voted out of office !!!

If the euro problem does turn into a crisis, however, 2010 could turn out to be the year of the currency fights. The United States and Europe are both showing more irritation at China’s refusal to allow the Rimminbi to appreciate against the dollar, a decision that makes the Chinese export economy more competitive when it is already running large trade surpluses.

So turbulent times with many possible outcomes… Watch out

The danger of a euro crisis is increasing; it may prompt more political integration, not less.The signalling is coming not from the foreign-exchange market (the euro has climbed back from its October low against the dollar) but from the bond markets. Spreads on the ten-year government debt of Greece, Ireland, Italy, Portugal and Spain over that of Germany have widened sharply. Rating agencies are paying particularly close attention to the fiscal positions of the profligate five: Standard & Poor’s has downgraded three of them and put another on credit watch.

That need not imply a straightforward bail-out. But it does suggest the euro area might need an equivalent of the International Monetary Fund’s rescue packages. It would imply both a bigger role for the centre and more intrusive monitoring of euro members’ budgets. Far from fulfilling the eurosceptics’ dream of kiboshing the entire European project, a crisis could thus lead to even deeper political integration. That is a guess. But some form of euro drama looks ever more likely—and it would be better if governments started preparing for it now.

Dear Governments get ready for that !!!