Austria wants to link bailout collateral with banks’ risks

Maria Fekter

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Austria proposed on Friday that Greece should post collateral in exchange for loan guarantees provided by those eurozone countries whose finance sectors have only low risks from Greek investments.
      Last week Finland said that it had reached a bilateral agreement in which Greece promised to put up cash collateral for part of the eurozone bailout loan guaranteed by Finland. Austria, The Netherlands, and Slovakia have said that they want similar arrangements for their guarantees.
      “The agreement negotiated by Finland means that the other countries will have to pay more”, said Austria’s Minister of Finance Maria Fekter on Friday. “I also know that if everyone demands collateral, the Greek bailout package will not be implemented. That is why we are proposing that the collateral should be linked with the participation of the private sector of each country."
     
Fekter says that she spoke on Wednesday with Finnish Minister of Finance Jutta Urpilainen (SDP). Fekter said that Urpilainen had told her that Finland is getting collateral from Greece worth 20 per cent of the portion of the loan that Finland had guaranteed.
      In Finland neither Urpilainen nor the Ministry of Finance has revealed the size of the collateral, but Helsingin Sanomat has learned that it is closer to 40 per cent of Finland’s calculated share of the loan, which is at least EUR 1.4 billion.
     
Critical voices are emerging in Finland as well. National Coalition Party parliamentary group leader Jan Vapaavuori says that the agreement had the “good intention" to secure Finnish interests. However, he fears that the resulting furore could actually prove harmful to Finland.
      “We have worked constructively at European tables, and have tried to promote the common interest of the continent. We have consistently tried to avoid bringing domestic disputes to the EU table”, Vapaavuori ponders.
      He feels that Finland has taken constructive action to build up positive confidence capital for use in connection with “an issue that is really important nationally”.
      “One might ask if this controversy over collateral has been worth it. Are we now causing problems and eating away at our confidence capital?” Vapaavuori asked.
     
Opposition True Finns parliamentary group leader Pirkko Ruohonen-Lerner warned that the entire bailout package might collapse if very many countries demand the special considerations that were extended to Finland.
      She also said that credible collateral is better than nothing.
      “We are not happy about the whole, but rather we are worried about what will happen later now that a majority in Parliament chose this road of common responsibility a year and a half ago”, Ruohonen-Lerner says.
     
Centre Party parliamentary group leader Kimmo Tiilikainen feels that that the government is dabbling in minor details while steps are being taken in the EU toward the formation of a federation.
      “Finland is squandering all of its political weight and its voice on this collateral issue, while losing its voice in issues that are genuinely big, with which the future of the eurozone is now being altered”, Tiilikainen says.
      “Is government policy being guided by the economic crisis or [is this about] saving the face of the Social Democrats? I wonder how long the National Coalition Party is willing to stand and watch this.”
     


Previously in HS International Edition:
  Finland and Greece agree on bailout terms (17.8.2011)
  Greece: No other countries can expect collateral arrangement (19.8.2011)
  Finland: No compromise on Greek collateral issue (18.8.2011)

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