Finland has no collateral agreement with Greece yet

Martti Hetemäki

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Finland and Greece have not yet signed an agreement under which Finland would get collateral for its share of the guarantees for Greece’s loan programme. The conditions of the agreement were ironed out after lengthy negotiations in October.
      “It was not possible to sign the agreement because the negotiations with Greece over the new loan programme are incomplete. For that reason we do not know what Finland’s future share of the guarantees, or the required amount of collateral”, says Martti Hetemäki, Undersecretary of State at the Ministry of Finance.
     
The new loan programme is to be set up by the European Financial Stability Facility (EFSF), whose capital acquisition is usually guaranteed by the eurozone countries.
      Hetemäki emphasises that Finland cannot accept the Greek loan programme before the collateral agreement is signed, and without Finland’s consent, the EFSF cannot decide on a new programme.
     
In the view of Juha Raitio, Professor of European Law at the University of Helsinki, it is surprising that Finland does not have a legally binding agreement on the collateral.
      “This fittingly describes the tailspin that Greece is in. Negotiations with private investors have failed repeatedly. For that reason it is understandable that Finland does not have a clear picture of the guarantee that is needed”, Professor Raitio says.
      The eurozone countries have not managed to reach agreement on the new emergency funding for Greece, because numerous details remain open in the new loan programme.
     
It is not yet clear how big a loan programme Greece needs to be able to pay off its outstanding debts to investors, and what kinds of structural change are expected of Greece as a condition for the financing.
      There is also no complete certainty on how big a share of the financing will be taken up by the International Monetary Fund.
      Greece’s talks with private investors on reducing the loans are also unfinished.
     
The ministers of finance of the eurozone countries gave political approval in October to the collateral arrangements negotiated by Greece and Finland. The arrangement is very complicated. The idea is that the EUR 880 million in collateral extended to Finland will gradually grow over 30 years to correspond to Finland’s share of the guarantees.
      The EFSF will borrow from financial markets to raise the money for Greece’s loan programme.
      Finland’s share of the guarantee is 1.8 per cent of the total financing granted under the EFSF. According to calculations made in October, this would be about EUR 2.2 billion.


Previously in HS International Edition:
  High price to be paid by Finland for collateral for Greek loan guarantees (5.10.2011)
  Agreement reached in Luxembourg on collateral demanded by Finland (4.10.2011)
  Lipponen defends Finnish demands for collateral for Greek loan guarantees (21.9.2011)

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