Finland wants Greece to pay adequate interest on any emergency loans

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Finnish participation in European Union support for Greece is consistent with previous policies, under which Finland has lent money to help Iceland and Latvia.
      Iceland is not a member of the EU, but it is a Nordic country. Latvia, meanwhile, is in the EU, but unlike Greece, it is not part of the euro zone.
     
Finland has granted Iceland a loan of EUR 320 million. Parliament has given its approval to the move, and a quarter of the principle has already been paid to Iceland.
      When Parliament soon debates the year’s second supplementary budget, it should approve the loan that has been granted to Latvia - EUR 320 million.
     
A size of possible Finnish loan to Greece remains unknown.
      Greece’s acute need for financial aid is estimated at close to EUR 20 billion.
      The euro countries are expected to cover more than half of this, with payments in proportion to their shares of the capital in the European Central Bank.
      On this basis it is possible to estimate that Finland’s loan might be in the neighbourhood of EUR 240 million.
      However, this calculation assumes that all of the money to be let to Greece could come from the eurozone countries. In fact, a significant portion is expected to come from the International Monetary Fund, which would reduce Finland’s share.
     
An aid package to Greece is likely to raise some questions among the citizens of other European countries that are struggling with the ongoing recession.
      Many euro countries are struggling with deficits in their public finances and are cutting costs with a heavy hand.
      If Finland were to lend money to Greece, it would expect to be paid interest on the money. This interest rate would have to be higher than what Finland pays its own creditors.
     
Prime Minister Matti Vanhanen (Centre) used this logic when he explained how a possible Finnish loan to Greece would work.
      Vanhanen emphasised that supporting Greece would be a business venture, which would benefit Finland.
      Greece would also benefit from such an arrangement. Greece is currently borrowing money from investors at an interest rate of more than six per cent.
      It is likely that Finland and the other euro countries would offer significantly lower interest.


Previously in HS International Edition:
  Rehn: Eurozone countries must decide on Greece aid this week (24.3.2010)
  Some Euro countries willing to let Greece take IMF money (17.3.2010)
  EU urges Greece to enact more spending cuts (16.2.2010)

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