A 109 billion euro ($157 billion) international bailout for Greece ran into trouble Thursday after at least five countries demanded that the Greek government give them cash as collateral in exchange for their contributions to the rescue fund.
The Netherlands, Slovenia, Austria and Slovakia said Thursday they wanted hundreds of millions of euros in collateral just like Finland, which struck a deal with the Greek government on Tuesday to receive cash as security for the Finnish part of the bailout.
The pro-European Finnish government demanded the collateral from Greece in response to the increasing popularity of an anti-bailout nationalist party that made sizable gains in April elections.
Even with five nations demanding extra security for their loans in response to the Finnish deal, the amount of cash would probably not be large enough to scuttle the bailout entirely. But it could drive up the overall cost of the bailout, as Greece would need extra funds to put up collateral on top of servicing its debts, paying workers’ salaries and meeting other financial obligation.
The demands for collateral also reveal growing fissures in the eurozone’s efforts to rescue Greece and other struggling countries and ultimately safeguard the common currency.
With the Finnish collateral deal, “a message is being sent to countries (that) if you have a euro-sceptic vote, you are actually being rewarded for it,” said Pieter Cleppe, the head of the Brussels office of think tank Open Europe.
Finland says without the collateral its parliament won’t sign off on its share of the second rescue package for Greece, which was left unable to pay its bills after investors worried about its massive national debt began demanding extremely high interest rates on Greek bonds.
A provision for such added security was included in the July 21 agreement by eurozone leaders on the bailout.
Ever since the national elections in April saw the right-wing, anti-bailout True Finns party gain a large share of the vote, traditionally pro-euro Finland has joined a growing group of countries that have struggled to convince their own parliaments and citizens that bailing out their neighbors is in their own good.
Slovakia and Slovenia, two of the eurozone’s poorer members, have long balked at having to support countries like Greece and Ireland, whose citizens on average make more money than theirs. Slovakia refused to participate in the first 110 billion euro bailout package for Greece, but is a member of the European Financial Stability Facility, which will fund the majority of the second rescue package.
Critics in Finland, Austria and the Netherlands, meanwhile, point out that their countries’ banks have a lower exposure to Greece than lenders in Germany and France and will thus see less of a direct benefit from supporting the country.
Estonian Finance Minister Jurgen Ligi blasted Finland’s agreement with Greece on Thursday, calling it “a deviation from the common policy of the eurozone.”
“The guarantee for the aiding countries should be Greece’s budget and economic policies as well as structural reforms, not how much one manages to gather Greek assets as collateral for its own use,” Ligi said in an interview with the Baltic News Service.
Ligi later told reporters that having to put up money for collateral “will weaken (Greece’s) ability to pay back its loans.”
But Harald Waiglein, a spokesman for the Austrian finance ministry, which is now also demanding extra security for its contribution to the rescue package, said it was politically not viable to give a collateral deal to one country but not others.
“Our position has always been that if there is collateral, Austria will also use it,” Waiglein said.
The cost of providing collateral for the contributions of small countries whose banks don’t have a big exposure to Greece should be “manageable,” reaching less than a two-digit million figure, said Waiglein, but he conceded that such deals could drive up the overall bailout sum.
The exact amount of each country’s share of the euro109 billion rescue is not clear yet, because the International Monetary Fund has not said how much it will provide and Greece is still in the process of negotiating easier debt repayment terms with banks and other private lenders.
A lower contribution from the private sector or extra collateral costs could require the eurozone and the IMF to put up more than the 109 billion euros they initially agreed on.
Slovenia’s finance ministry spokeswoman Irena Ferkulj said in a written statement to the AP that Slovenia is currently negotiating “possible guarantees” and will strive to get them for the complete sum that it pledged for Greece.
Slovak government spokesman Rado Bato said Slovakia had also demanded collateral.
Dutch Finance Ministry spokesman Niels Redeker said that his country had always “indicated in discussions in Brussels that if Finland would get a collateral agreement that we also want a collateral agreement.”
Other eurozone countries have to approve the Finnish collateral deal and national representatives were set to discuss the agreement and other requests at Thursday and Friday.
Jussi Lindgren, an official at the Finnish finance ministry, who was presenting the deal to other eurozone member countries in Brussels said the country has no reason to be worried if other eurozone members demand similar collateral.
“From Finland’s point of view it’s clear. We don’t really have to be worried if other countries want similar or other guarantees from Greece,” Lindgren told Finnish broadcaster YLE. “They would have to negotiate their own deals, and see if it’s at all possible.”
____
Jari Tanner in Tallinn, Estonia, Elena Becatoros in Athens, Matti Huuhtanen in Helsinki, Dusan Stojanovic in Belgrade and Michael Corder in The Hague contributed to this story.
Source