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A side deal struck between Finland and Greece may have thrown a spanner in the works of the second Greek bailout – and undermined the ECB’s efforts to end the Eurozone’s debt crisis.This afternoon the Finnish prime minister Jyrki Katainen confirmed that he would pull Finland out of the second Greek bailout deal if the country was not given collateral for its part in the deal.
Reuters reports that when reporters asked Katainen if his country could simply opt out of the bailout deal, the premier simply answered: “Yes.”
Katainen explained that while the bailout as a whole would not be blocked by Finland’s insistence, “in any case we demand that collateral. It is our parliament’s decision that we demand it as a condition for us joining in.”
The Financial Times explains that Finland and Greece had struck a deal last week, securing collateral from the Greek government in exchange for Finnish participation in the second loan backage.
Since then, other countries like Austria, the Netherlands and Slovakia have also asked for similar deals – jealous, essentially, that Finland could repossess Greece’s assets if it doesn’t repay its loans, while everyone else is forced to go without.
The Netherlands has now changed tack and said that while it doesn’t necessarily want collateral of its own, or doesn’t object to Finland securing some, the Finnish deal went against the idea that all Euro members are equal.
Dutch finance minister Jan Kees de Jager told the FT that the idea Finland could get collateral when nobody else could was “not compatible with the principle of equal treatment of all euro countries.”
Germany, which ordinarily takes a leadership role in such affairs, is also undecided. Reuters reported earlier that a minister in the German cabinet said future bailouts should only be given in exchange for guarantees on some assets.
Angela Merkel, however, has distanced herself from this – despite claims from Michael Noonan two months ago that Germany and France had been seeking ‘liens’ in exchange for any new loans.
For its own part, the Irish Department of Finance says it will not be seeking collateral for its role in a second Greek bailout, which is due to be negotiated at European level next month after being given a preliminary green light earlier this summer.
“We are not looking for collateral,” a Department spokeswoman said. “Our loan is very small relative to the others as we stepped out of the assistance programme when we got our programme of assistance.”
Ireland had contributed €345.7m to the first Greek bailout but withdrew from that programme when it secured its own EU-IMF bailout last November.
Greece has been making quarterly interest repayments to Ireland since late December, and is scheduled to begin repaying the principal of the loan in 2013.