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Greek Finance Minister Evangelos Venizelos speaking at a press conference last month. AP Photo/Petros Giannakouris
Greece
Greek bailout deal threatened by Finnish collateral agreement
Under the collateral clause, Greece will pay hundreds of millions of euros to a Finnish account to generate interest to cover Finland’s bailout contribution.
A SECOND EU bailout loan to Greece is under pressure after several EU countries appear prepared to join Finland in demanding collateral from Greece in exchange for their fund contribution.
Greece agreed two days ago to deposit hundreds of millions of euros in a Finnish state account before Finland contributes towards the second bailout. The deposited funds will generate the interest which will cover Finland’s contribution to the bailout.
There are fears the collateral payment will undermine the bailout fund overall, as Greece diverts money to the Finnish account instead of paying its debts and public servants’ salaries.
A provision for the Finnish deal was apparently included in the 21 July agreement signed off on by eurozone leaders, but its enactment has been heavily criticised by Estonia’s finance minister.
Jurgen Ligi said the move marked a “deviation from the common policy of the eurozone”.
An EU official told the Associated Press that the Finnish deal “creates asymmetries in the support provided to Greece and it opens the door” for other countries to make similar requests.
The Helsingen Sanomat reports that Austria has also reacted angrily to the collateral agreement. Austrian Finance Minister Harald Waigelin told the paper that the “model has to be open to all euro countries. We plan to find out if this is the case.”
Waigelin continued:
As Greece cannot afford the collateral, the EU needs to help. Ultimately, it is the other member states that will pay. We cannot see how this would be fair. Austria has done much and paid much, and now it’s supposed to finance the collateral that Finland gets. There is no sense in this.
Austria, the Netherlands, Solvenia and Slovakia are now expected to pursue their own collateral agreements with Greece, Bloomberg reports.
Barclay’s Capital economist Francois Cabau said that the Finnish insistence on collateral from Greece “unduly complicates the process to come to a swift agreement on Greece”.
- Additional reporting by the AP
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