The short answer is: it depends.   We all know the saying, that if you owe your bank 100 000 dollars you have a problem, if you owe a hundred million dollars, your bank has a problem.   Although it is a huge mistake to directly compare the management of your personal economy with that of a country, this saying with the numbers multiplied a thousand fold does hold an element of truth.   Modern economies are built on debt, as is any monetary economy. With this in mind debt is like oxygen which keeps humankind breathing and alive. Unlike oxygen, however, too much debt can sometimes turn out to be fatal.   Lending and borrowing are interrelated: it is easy to condemn reckless borrowing, but reckless lenders are as much at fault and should also bear the consequences of their risk taking, following all normal market economy rules.   In any insolvency situation there are, or should be, mechanisms to handle such situations so as to minimize the losses to all involved including any damage to the real economy.   Debt resolution mechanisms 

Anybody who borrows more than they can repay is going to end up defaulting – either explicitly or implicitly. From ancient history up until the present moment, we’ve experienced governments defaulting on their debt and building unsustainable debt burdens that have been restructured or cancelled.

One interesting example in today’s context is the so-called London agreement from 1953. Germany received a 50% cancellation of its pre Second World War and post war restructuring debts by creditor countries like US, UK, France, as well as Greece and Spain and a number of other countries. This debt agreement was an important part of rebuilding the West-German economy.

In recent decades various mechanisms have been created to resolve defaults by developing countries:

Today we have The Paris Club where creditor countries renegotiate bilateral official debts. The major challenge of the Club is of course that it only includes rich western states and not countries such as China, who has quickly become an important creditor for many developing countries.

Then we have the London Club, a parallel, informal group of private firms, which meets in London to renegotiate commercial bank debts. One of the main challenges of the London Club is that unlike the Paris Club, there is no permanent membership. At a debtor nation’s request, a London Club meeting of its creditors may be formed, and the Club is subsequently dissolved after a restructuring is in place

For poor countries we have the international debt relief initiatives of HIPC (Highly Indebted Poor Countries) and MDRI (Multilateral Debt Relief initiative), which have provided significant multilateral debt relief in recent years.   Despite of these different mechanisms we still have cases of sovereign defaults which turn out to be tricky and messy. Perhaps the most talked about problem case of recent times is Argentina. The dilemma of course in this case was that a small minority of creditors was able to forestall an otherwise-agreed debt restructuring of an insolvent country.

This relates to a larger systemic issue in the governance of the international economy. All of the debt resolution mechanisms that I just mentioned are mechanisms run by creditors themselves. They are not independent legal mechanisms, which set rules for orderly debt restructuring between creditors and debtors, such as Chapter 9 in the US Bankruptcy code, which is available for financially distressed municipalities.

In international debates, for example by developing countries and the international civil society, there have been calls for a long time for improved debt resolution mechanisms, which would better balance the interests of creditors and debtors. This has been perceived to be important for better enabling the economic recovery and growth of the debt distressed states. One recent example of these types of initiatives is the UN General Assembly resolution from September 2014 on “establishment of a multilateral legal framework for sovereign debt restricting process”, which noted with concern that “the international financial system does not have a sound legal framework for the orderly and predictable restructuring of sovereign debt”.         

Management of the Euro Crisis

The right thing would have been to go for an orderly debt restructuring from the very beginning. This was rejected out of hand, mostly, one can suspect, because of the urgent need to save the German and French banks, which were those most heavily exposed to Greece.

German banks’ foreign claims on Greece were 32 billion in March 2010. French bank’s exposures were even larger: over 50 billion. Since then the weight of public creditors has increased among the creditors of the Greek government. Essentially this move has enabled investors to dodge their investment risk.

The question to ask about the newly establish EU mechanisms, such as the European Stability Mechanism, is whether they are able to prevent new crises.

The Role of Rules

Yes, rules are needed but they should be intelligent and intelligently applied. Unfortunately the EU’s rules are arbitrary rather than intelligent and can when applied mechanically cause huge damage to the real economy by creating unemployment and cutting growth.

In Finland we are or should be more concerned about the mechanical application of EU rules rather than the level of our debt or deficit which is fully under control and no threat to our financial stability.

For example, the “sustainability gap in public finances” has become a subject of a heated debate in Finland. However, it is very difficult to estimate where the line goes between sustainable and unsustainable level of public finances in any single country. EU has defined it to be 60 percent of the GNI. However this is not based on any research or even experience.

All sustainability calculations include many assumptions and variables such as the growth of GDP/GNI, population growth and changes in demography, real interest rates, unemployment rate, demand of social security benefits etc.

Assumptions about the changes in there variables has led to a situation where we have estimates of the sustainability gap varying between 1 and 6 billion euros depending on who has done the math. This uncertainty means, for example, that if the assumed GNI growth were 2 percent instead of 1 the whole sustainability gap becomes next to negligible.

Low Income Countries increasingly able to source financing from financial markets              

Lastly, let me say a few words about debt of poor countries.

Low-income countries have had growing success in obtaining sources of financing other than official development assistance (ODA). Perhaps most prominent is the recent group of countries engaged in first time sovereign bond issuances. The broader macroeconomic trends in these countries suggest that they are better positioned to sustain access to private flows today than during any other period before.

More generally, financing outside of traditional ODA sources are becoming increasingly important for developing countries. Foreign direct investment (FDI) from OECD countries has more than doubled over the last ten years. It is now 1.7 times as large as total ODA. Remittance flows to developing countries, too, are growing rapidly. South-South financing also has an increasing footprint.

Having said this we should be vigilant about debt sustainability. Hard won gains achieved through the international debt relief initiatives of HIPC (Highly Indebted Poor Countries) and MDRI (Multilateral Debt Relief initiative) should not be wasted due to reckless over borrowing.

I am very happy to be here today to share with you some thoughts on the importance of the values we share as Europeans. Your generation is growing up in a time when European integration has already made big strides. For young Europeans, the entire European Union with its 28 member states is your home territory. Programs like Erasmus makes it very easy for you to study in any European country you like, and the internal market enables you to work and live in any other EU member state. I encourage you to make full use of all these opportunities. In Europe we are lucky to have a great diversity and richness of people, languages, history and culture to learn from. This is a lesson also for our external relations: we do not want to see a Fortress Europe closing its borders from the rest of the world either. The challenging times we are going through in and outside of the EU highlight the need to espouse and strengthen the common values on which our Union is founded. I would like to talk to you today about what these values are and how they have benefited the Union and its members; how they are challenged today and what we can do to counter these challenges.
Europe: a project of peace, prosperity and shared values

The European Union has been successful as a peace project. The original aim was to ensure that never again would wars start from conflict between European countries which have led to two world wars and countless smaller ones. In this respect we can regard the European Union as the most successful peace project in history, as the awarding of the Nobel Peace Prize to the EU underlined. This should not be forgotten now that popular disappointment with Europe for example concerning the handling of the Eurocrisis is growing. The European Union has been from the start open to all European countries and peoples who wish to join it and fulfill the criteria. EU enlargement has been a key factor in increasing Europe’s political and social stability. Greece, Spain and Portugal were able to join the European Community in the 1980s, after breaking with their undemocratic pasts. The end of the Cold War enabled countries liberated from their undemocratic systems – the Baltic States, and Eastern European and Balkan countries – to seek membership of the European Union. It is also very important to note the effect on peace and stability that the union has had and continues to have on the region as a whole. For prospective member countries, the membership process itself encourages countries to remain on the path to democracy, respect for fundamental rights and the rule of law. The Western Balkans is a good example of this. Without our enlarged European Union, Europe would look decidedly different today. The EU has also been successful in terms of economic integration. This integration is commonly understood as resting on four basic freedoms: the free movement of persons, goods, services and capital. These freedoms, to be fully beneficial to all people in Europe, need to be completed with a social dimension that sees to it that the benefits of economic growth are distributed fairly and that the underprivileged are not left behind. The European Union remains the world’s most important economic area and trade bloc, despite its current challenges. The European internal market offers businesses unrestricted access to the world’s largest economic area. However, for Finland, membership in the EU is much more than an economic issue. This brings me to my final point, and the main focus of today. For us, EU membership is a choice based on a particular set of values and politics, which we as a Nordic country have always shared. But what are these shared values and what do they signify? In the Treaties establishing the European Union, its fundamental values are defined as respect for human dignity, freedom, democracy, equality, rule of law and respect for human rights, including rights of persons belonging to minorities. Member States and institutions are committed to respecting and promoting these. All EU Member States should be characterized by a plurality of values, non-discrimination, tolerance, justice, solidarity and equality between women and men. An integral part of the EU’s common values are also fundamental social rights, such as the right to employment and the right to exercise a profession. Democratic societies guarantee the realization of fundamental rights, and as the union is based on representative democracy, these values need to be safeguarded also on the Union level. The legitimacy of the European Union will be undermined, if we do not live up to these fundamental values and maintain democratic, open and efficient institutions. Further, the union has also to be seen as achieving results for its citizens – citizens should feel that the EU protects and advances their rights, and works in their best interest. However much we have already done to build on these values, we cannot just rely on past achievements. As you are well aware, Europe is today facing a wide array of both old and new challenges to security, democracy and to well-being.  And these threats do not only manifest themselves in far-away countries. They are appearing in our immediate vicinity – in Europe through the crisis in Ukraine and in our southern neighborhood through the crisis in Syria and Iraq. Also within the Union there has been increasing skepticism and discontent, which is manifested in the growing support for Eurosceptic, nationalist and radical parties, as well as in social unrest and popular protests in many European countries. These challenges require a robust response and new solutions. The question is how can we can respond to them.
How are these values challenged today?

Let me begin by discussing security policy. Europe’s security environment has undergone some very negative changes. Severe conflicts have emerged both in our southern and eastern neighborhood. These are threats that face the entire Union. We have to respond to them collectively, regardless of whether the conflicts are closer to the borders of our Eastern or Southern Member States. In the South, the world has recently witnessed how calls for democracy, justice and reforms have led into a brutal civil war in Syria. The violent conflict has spilled over to the neighboring areas, led to an unprecedented number of refugees and contributed to the creation of one of the most horrendous terrorist organizations of our time, ISIL. The rapid rise and spread of ISIL/Da’esh has taken us by surprise. It poses a severe threat to our partners in the Middle East, to wider international security and to Europe directly. There is a concrete risk that ISIL’s influence spreads also to other conflicts in the region – Libya, Yemen and Palestine to mention the most acute – if we can’t find ways to stop it in its tracks. In the response to the crisis in the region, we welcome the EU High Representative’s regional strategy for Syria and Iraq and the threat by ISIL/Da’esh. The Commission has allocated 1 billion EUR for implementing the strategy, which is a considerable contribution. The fight against ISIL/Da’esh and other terrorist groups must be conducted in parallel with the search for lasting political solutions. An inclusive political transition in Syria and inclusive political governance in Iraq are crucial to sustainable peace and stability in the region. We cannot deal with ISIL with air-strikes alone. We need a common will and a long-term comprehensive approach that tackles the root causes. The unrest in the south has also created unprecedented flows of refugees and other migrants both in the region and in Europe. While the number of migrants that we receive here in Europe indeed has increased drastically, it is important to note that the neighboring countries, particularly Jordan and Lebanon, are bearing the brunt of the Syrian and Iraqi refugees: already close to 4 million. Strong support of the EU to these countries is of utmost importance. The European Union also has to step up its efforts in managing the inflow of migrants in a sustainable way. The number of migrants crossing the Mediterranean into Europe is increasing rapidly, as is also the number of migrants who do not make it across. Last year, 3400 migrants were registered as drowned or missing in the Mediterranean, almost seven times more than in the previous year. This is unacceptable and cannot continue. We must find sustainable solutions to this migration crisis. We also have to live up to our standards, principles and values in safeguarding the human rights of migrants. Our fundamental values need to be applied also to those entering our territory. We also need to see migration as a phenomenon that touches upon all societal areas: economy, employment, health, education, to mention a few. We need coherent and comprehensive policies on EU and international level to maximize positive effects and to address the negative effects of migration on development. Let me now turn to the conflict in our Eastern Neighborhood. We have unfortunately been forced to witness the return of military conflict within the borders of Europe. For us Europeans the conflict in Ukraine has been a wake-up call, something that took many of us by surprise. It will have wide and profound repercussions for the future of our continent. In our response to the conflict, unity within the EU of utmost importance. Finland fully supports EU’s restrictive measures against Russia, aiming at supporting a political solution to the crisis in Ukraine. The possibility of their removal will depend on the implementation of the Minsk agreement. To make this possible we have to be firm with all parties, Ukraine and Russia, that the agreements are fully implemented. The relationship between the EU and Russia has gone through a profound change during the past year. While the deterioration of these relations are mainly a result of Russia’s choices and actions we also need to take a critical look at any mistakes the EU and the West in general may have made in dealing with Post-Soviet Russia. While these mistakes do not in any way provide a justification for the power political course Russia has taken, a self-critical look at for example how we managed the Eastern Partnership is needed to avoid future mistakes and help in finding a path back to less strained relations. The change in Russia’s overall policy is likely to be long-lasting: Previously, the partnership with Russia was supposed to be built on common principles and values. Today’s Russia is however drifting further towards authoritarianism and illiberal values. This means that a new approach is required in our relations to Russia. At the same time, we need to keep the lines of dialogue open to Russia. Russia remains a key partner for the EU in a long range of issues, including our Arctic and Baltic Sea cooperation, the fight against climate change and terrorism and in achieving a lasting solution to the crisis in Iraq and Syria. To summarize, what we need in response to the crises and unrest in our neighborhood is united and coherent action within the EU. This means deepening our Common Foreign and Security Policy (CFSP) to be more effective, coherent and coordinated. We therefore support the drafting of a new security strategy for Europe. We expect the strategy to strengthen and guide the EU’s external policy and to clearly define the principles, objectives and values underpinning our policy. We want the strategy to result in an elevated profile for the union as a global security player, which hopefully is reflected in further development of our crisis management and joint defense capacity. We also hope that the strategy can set out a middle to long term strategy for building our relations to Russia. Another instrument for strengthening our external response is the renewal of our neighborhood policy (ENP). The objective of the ENP remains to promote stability, prosperity and democratic development in the region. As I mentioned earlier, the EU has had a remarkable positive impact on democracy, stability and adherence to the rule of law in its neighborhood. We should stress the ENP’s capability to influence and change lives of millions of people for the better. However, there remains plenty of room for making our neighborhood policy more strategic and effective. It needs to be more flexible and tailor-made, and better take partner’s expectations and interests into account. We should also offer our neighbors more systematic access to our internal markets as well as freer movements for studies and work. Promoting mobility and visa liberalization supports the democratic development of our partners. We need to provide persistent support and co-operation to our partners, including a long term vision of their political and economic association with the Union. I am happy that the consultations related to the review of ENP have already been initiated, and hope we can make headway in the above mentioned and other fields. In our Eastern neighbourhood, we look very much forward to the Riga Summit on Eastern Partnership, where we have high level discussions with Moldova, Ukraine, Georgia, Azerbaijan, Armenia and Belarus. For Finland, apart from encouraging increased mobility, an important objective is to increase support for and participation of civil society in recognition of its importance for change and reforms in partner countries. We also need better communication regarding the objectives of our neighbourhood policy.  The enlargement of the EU towards the East and Baltics, as well as our Eastern partnership, has been seen by Russia as a policy directed against it. Some statements from EU leaders may have fuelled this perception, but this is not and has not been the case. Our neighbourhood policy must be conducted in a manner that makes it clear that it is not a threat against the interests of any other countries or groups. Developing the economy and sstrengthening the rule of law and human rights will bring benefits for all neighbors. However, we there should be a clear awareness of how Russia is trying to influence EU member states through its own strategic communication. Special attention should be paid to how to better communicate EU messages to Russian-speaking audiences. I have mentioned external challenges to the union and what needs to be done in response to them. Let me know turn to our own internal challenges. These internal criticisms and challenges take on many shapes. Due to the social and societal problems caused by the economic crisis, questions about the internal stability of Member States and compliance with the Rule of Law have gained greater urgency. In effect, a growing number of people are questioning the legitimacy of our European project. It is important that we do not ignore this criticism, some of which is very valid. As an example, I would like to mention the adherence to the Rule of Law. Respect for the Rule of Law means safeguarding much of the fundamental values and freedoms our union is built on. If we overlook breaches of the Rule of Law, we undermine our own efforts to build a better Europe, and in the end our own legitimacy. We also cannot act in a unified and credible way in promoting democracy and the Rule of Law outside of our borders if we don’t have our own house in order. Instead of been taken as self-evident, upholding the fundamental values and the level of protection for the human rights requires constant attention also inside the European Union. That is why strengthening the fundamental rights and Rule of Law is one of Finland’s key objectives in all policy areas. The discussion on the need to monitor and enhance the Rule-of-Law within the Union has picked up pace during recent years. The European Parliament, Commission and Council are all developing their own mechanisms for this task. Finland has been very proactive in advancing this discussion and these efforts now seem to bear fruit. Another key issue is also to strengthen the democratic legitimacy of the Union’s decision-making. This is necessary if we are to deepen European integration, while retaining the support of the EU’s citizens. We must ensure openness and transparency, and provide citizens with opportunities to influence and participate. Strengthening these common values puts the focus not only on the EU institutions, which need to work in a more open and engaging way, but also on the national level. Decision making on the national level needs to follow the same common and shared values. European integration means that the Union needs to work in a way that citizens feel represent their own values and interests, and that they feel is their own. This strengthens the democratic justification of the union.
Conclusions: a unified and value-based EU as the way forward 

The European Union must now answer fundamental questions in many respects. To move forward successfully, the European Union must reform. Finland’s policy in this regard is clear: we support closer integration as long as it can be achieved in a manner that the Member States and citizens find necessary, fair and just. Both economically and socially, the EU must be a balanced community of values. A stronger, more unified and fairer Union would best serve the interests of its citizens. In many respects, the EU is a global super power. As a partner in trade, politics and development, the union and its member states are the preferred choice for a large number of countries in the world. The success the Union has achieved in building peace and promoting stability for its members is admired worldwide. Its strong value foundation makes it a trustworthy, predictable and fair partner across the globe. I wish you fruitful and interesting discussions during your conference week here in Helsinki. Thank you very much.