Euro zone deal raises eyebrows

Finland and the Netherlands, the euro zone’s most hardline creditor states, cast the first doubts on Monday on a European summit deal designed to save Spain and Italy from being engulfed by the currency bloc’s debt crisis.

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, despite an agreement among leaders last Friday that the

The Finnish and the Dutch said they will block euro zone’s permanent bailout fund buying bonds despite a pact among leaders to stabilize markets

fund could be activated to stabilize markets.

The euro fell, European stocks gave up gains 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 unravel.

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.

The 17 euro zone leaders agreed in Brussels on steps to shore up their monetary union and bring down borrowing costs for Spain and Italy, regarded as too big to fail but also too expensive to rescue if they are shut out of markets. They gave few details on the use of the temporary EFSF and permanent ESM rescue funds.

ESM bond buying in secondary markets would require unanimity and that seems unlikely because Finland and the Netherlands are against it, the Finnish government said in a report.

Dutch finance ministry spokesman Niels Redeker said the Netherlands did not support using the bailout fund to buy bonds on the secondary market and evaluate purchases case-by-case. — Reuters