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31st Oct 2020

Finland puts Greek bailout package under pressure

The eurozone's second bailout for Greece, agreed in July, already looks in trouble as a series of smaller EU countries demands that Athens puts up collateral in return for national loans.

The Finnish government has been leading the push. Helsinki on Tuesday (16 August) announced that a deal had been reached with Greece that would see Athens make a cash deposit to guarantee Finland's share in the €109 billion bailout.

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  • Timo Soini, the founder of the True Finns party, has become a force to be reckoned with in the Nordic country (Photo: European Parliament)

Finland has taken a hard line after the anti-bailout True Finns party burst onto the domestic political scene and scooped 19.1 percent of the vote in the April elections.

But the Tuesday deal has sparked a domino effect - Austria, the Netherlands, Slovenia and Slovakia have all indicated that they want the same treatment.

"The model has to be open to all euro countries. We plan to find out if this is the case", said Austrian Finance Ministry spokesman Harald Waigelin in a telephone interview with Helsingin Sanomat on Wednesday.

Dutch Finance Ministry spokesman Niels Redeker said The Hague had always "indicated in discussions in Brussels that if Finland would get a collateral agreement that we also want a collateral agreement."

The Slovenian finance ministry told AP news agency that it is looking for "possible guarantees" for its loan.

These countries only account for about 11 percent of the total loan but the move serves to further undermine the already fragile sense of solidarity in the 17-nation eurozone – as well as making markets more jittery.

While no big countries have yet asked for collateral, it raises the general question of whether some euro countries will simply accept to have worse loan terms than others by not asking for guarantees.

The need to put up collateral whether in the form of cash or other assets may also ultimately impair Athens’ ability to pay back the general loan.

Finland, needing parliamentary approval for the Greek bailout, has said what others do is their business.

"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," Jussi Lindgren, financial secretary at the Finnish finance ministry, told Finnish broadcaster YLE. "They would have to negotiate their own deals, and see if it's at all possible."

All such bilateral collateral deals have to be approved by the eurozone countries.

The uncertainty created by the demands are likely to further unease markets which have consistently doubted the underlying political commitment to deal with the eurozone’s debt crisis.

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