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Greece bailout in doubt as no Finnish deal reached

Despite growing concerns about Greece and Italy, Angela Merkel and Herman Van Rompuy move to ensure eurozone members that they are working to stabilise the common currency.

European Council President Herman Van Rompuy with Finnish PM Jyrki Katainen
European Council President Herman Van Rompuy with Finnish PM Jyrki Katainen
Image: Virginia Mayo/AP/Press Association Images

GREECE’S SECOND BAILOUT package is still in doubt as eurozone leaders fail to reach an agreement on Finland’s collateral demands.

European Council president Herman Van Rompuy was in Helsinki yesterday for a meeting with Finnish Prime Minister Jyrki Katainen, reports the Wall Street Journal.

He said “good progress” was made on reaching a deal which would address Finland’s concerns but still not undermine the wider purpose of “reinforcing confidence and financial stability” to the eurozone as a whole.

Speaking from the Finnish capital yesterday, Van Rompuy said the second Greek bailout, that was agreed upon by eurozone leaders at a key meeting on July 21, should be finalised by the end of this month.

However, to cover his bases, he told the Helsingin Sanomat newspaper that even if a deal is not reached by the end of September, it will not “create any drama”.

Bailout 2.0

In July, eurozone leaders agreed to provide Greece with a second bailout package worth €109bn. The International Monetary Fund and some private investors have also contributed to the fund.

The deal hit a stumbling block last month as Finland asked for collateral in exchange for its support.

A bilateral agreement had been reached between the two countries but other eurozone members objected to the deal because they were not offered similar arrangements.

In the July 21 bailout agreement, eurozone nations said that, where appropriate, a collateral arrangement will be put in place so as to cover the risk arising to euro area Member States from their guarantees to the EFSF.

“This is a common text, a common agreement, and we have to implement all the paragraphs and all the decisions we took [on July 21],”  Van Rompuy said after reading the text out verbatim.

Finland are the first eurozone nation to ask to cash in on this condition of the agreement.

Greece backs down on austerity

As talks continue between Germany and Finland today, other leaders continue to cast their doubts on a deal being pushed through.

Estonia’s Finance Minister Jurgen Ligi told the national broadcaster that he “seriously” doubts that Greece can be helped through the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).

“Guarantees and loans can only be strictly conditional, but Greece is not currently meeting those conditions,” Ligi said.

Earlier today, German Chancellor Angela Merkel told her own ruling party that Athens would not receive any financial support this month if certain conditions were not met.

Bloomberg reports that Germany expects Greece to meet its obligations but one party official stated that there cannot be more aid without “adequate behavior” by Greece.

However, echoing Van Rompuy’s earlier remarks, the Government spokesman said, “It was also very clear that we stand by our commitments within the euro stabilisation and that we’re ready to maintain and defend the euro as our common currency.”

Italy

Doubts about Italy’s finances also began to surface today as Reuters reports that Merkel called the country’s situation “extremely fragile”.

Meanwhile, Germany’s Finance Minister Wolfgang Scheuble has once more dismissed the idea of eurozone bonds.

Speaking in parliament today, he said such a move would be a perfect case of “misconceived solidarity”.

“The euro would lose its credibility as a stable currency,” he added.

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