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12th Aug 2022

Finland abandons Greek collateral deal under German pressure

  • Finnish far right politicians have pushed for guarantees. But others fear the deal could erode good will in Brussels (Photo: GregHickman)

Helsinki has abandoned a loan collateral deal with Athens after fellow eurozone countries said it threatened to undo the EU's second Greek bailout.

A contact in Finnish finance minister Jutta Urpilainen's office, speaking on condition of anonymity, told EUobserver on Friday (26 August): "The solution with Greece that we had last week is not valid any more but negotiations are ongoing for another solution."

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The decision comes after German Chancellor Angela Merkel on Wednesday said eurozone countries "should not take unilateral steps in the Greek crisis". Austria and the Netherlands also said they would block the Finnish-Greek deal unless they got similar treatment.

Under the terms of a 21 July pact on the new Greek bailout, all 17 euro-using countries must give consent for any top-up bilateral arrangements.

Finland had originally agreed that Greece would place up to €600 million in an escrow account in case it could not pay back the full amount of Finland's €1.4 billion part of the rescue package. Urpilainen back in July indicated that Finland might accept Greek state-owned property instead of cash as a form of guarantee.

Eurozone countries are racing to implement the 21 July deal - which also covers new bond-buying powers for the EU crisis fund, the EFSF - by the end of September in order to restore market confidence in the single currency.

The currency club suffered another setback on Wednesday when the Cypriot parliament's finance committee declined to back government tax hikes.

The committee asked Nicosia's finance minister Kikis Kazamias for more time to prepare amendments.

The development comes as Cyprus risks joining Greece, Ireland and Portugal in seeking eurozone financial support after an explosion at a power plant last month blew a hole in the country's budget.

Opinion-makers have in recent days heaped scorn on the EU's attempts to contain the crisis.

Former German chancellor Helmut Kohl said Merkel has undermined Berlin's "dependability." One-time EU commission president Jacques Delors said the euro is "on the brink" and former US treasury chief Alan Greenspan said it is "breaking down."

For his part, French President Nicolas Sarkozy talked up the euro on a trip to China on Thursday.

"[Chinese President] Hu has made a very definitive declaration about the confidence that he has in the eurozone and in the euro," he told press.

Chinese state media ahead of the French visit described the euro crisis as a new form of Black Death - an epidemic which decimated medieval Europe.

"We are certainly worried about the West's economic difficulties," Chinese deputy foreign minister Fu Ying said in a statement posted on the foreign ministry's website last week. "If European countries can hand-in-hand resolve the problems, the EU will continue to progress and further integrate, otherwise the euro zone could collapse."

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