That was a cute side note at the Eurogroup yesterday. Greek Finance Minister Evangelos Venizelos and his Finnish counterpart Jutta Urpilainen signed a bilateral agreement stating that leading Greek banks will provide collateral in sash and highly rated assets, should Greece default on its loan after all… The agreement was Finlands’ condition to participate in the second 130-billion-euro bailout package for Greece.
Finland’s English news and radio YLE reports on the issue:
The agreement, a condition for Finland’s participation in the new 130-billion-euro bailout package for Athens, states that leading Greek banks will provide collateral in cash and highly rated assets. Finnish Finance Minister Jutta Urpilainen and her Greek counterpart, Evangelos Venizelos, signed the deal in Brussels behind closed doors on Monday.
The loan guarantees cover 40 percent of Finland’s share of the bailout package. Under the deal, Greece will transfer one billion euros in bonds into an escrow account. Should Greece default on its loan, Finland will see its money in 15 to 30 years.
Internal politics at play
Loan guarantees, spearheaded by Urpilainen’s Social Democrats, became a key theme in last spring’s parliamentary elections, which were characterised by widespread anti-EU sentiment. The bilateral accord has been a point of contention among other eurozone states, as Finland’s demand has been a long-running obstacle to the bailout.
On the home front, the nationalist, anti-EU Finns Party criticised news of the side-deal, saying it only covered a fraction of the risk involved in the rescue package. The opposition was quick to point out that Finland is the only country that demanded collateral as a precondition for the bailout. Critics have suggested that election promises weighed more in the government’s guarantee demand than any other considerations. (YLE, Reuters)
In August 2011, KTG had some report on the collateral issue. Also Germany, Austria and the Netherlands had asked collateral guarantees, but only Finland managed to signed such an agreement. IIF’s Charles Dallara was against the idea.
PS Blonds have more fun…
