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Finns Set Greek Collateral Trend as More Euro Members Follow

Greece's finance minister Evangelos Venizelos, left, gestures as he speaks with Finland's finance minister Jutta Urpilainen. Photographer: Jock Fistick/Bloomberg
Greece's finance minister Evangelos Venizelos, left, gestures as he speaks with Finland's finance minister Jutta Urpilainen. Photographer: Jock Fistick/Bloomberg

Aug. 18 (Bloomberg) -- Finland’s efforts to get collateral in exchange for new rescue loans to Greece has sparked calls for similar deals from other euro members, highlighting obstacles to approving a second bailout for Europe’s most indebted country.

Austria and the Netherlands, both rated AAA, and Slovenia and Slovakia will probably pursue collateral arrangements after the northernmost euro member was able to strike an agreement with Greece this week, the countries said today.

“It always was our position in the council that if there is a collateral setup, Austria will participate,” Harald Waiglein, a spokesman for Austria’s Finance Ministry, said in a telephone interview from Vienna. The Netherlands “will demand collateral, just like Austria,” Finance Ministry spokesman Niels Redeker said by phone from The Hague today.

Finland’s collateral demands were included in a July 21 agreement by euro-area leaders to provide a new 159 billion-euro ($229 billion) aid package for Greece and grant broader powers to the region’s rescue fund. At the summit, AAA rated Finland fought for extra assurances it won’t lose money on its backing for the European Financial Stability Facility. The July 21 agreement needs to be ratified nationally.

Collateral Rights

Slovenia will “use its right to secure its part of the collateral within the general frame of the group,” Finance Ministry spokeswoman Irena Frkulj said in a phone interview out of Ljubljana today. A collateral deal “is one of Slovakia’s conditions,” Patricia Malecova, a spokeswoman at the Bratislava-based Finance Ministry said in an e-mailed statement. Still, Slovak Finance Minister Ivan Miklos told reporters that bilateral agreements are no solution.

“Finland’s insistence on collateral unduly complicates the process to come to a swift agreement on Greece, thus increasing the risk of political noise in the coming days and weeks,” Francois Cabau, an economist at Barclays Capital, wrote in a note to customers today.

Redeker said the position of the Netherlands is that “if Finland gets collateral, it shouldn’t hurt our creditor position.”

The collateral agreement “allows Finland to participate in the Greek loan,” Finnish Finance Minister Jutta Urpilainen said Aug. 16, when she announced the deal. “Without this arrangement, Finland won’t participate.”

The Nordic country’s agreement requires Greece to deposit cash in a state account that Finland will invest in AAA rated bonds. The interest generated will raise the amount, which has yet to be disclosed, to cover Finland’s bailout contribution. The bilateral arrangement needs approval from other euro members, Finland’s Finance Ministry said.

Equal Treatment

The Greek two-year note yield jumped 15 basis points to 35.14 percent, while the 10-year yield rose 24 basis points to 15.90 percent. The Portuguese 10-year yield climbed five basis points to 10.51 percent. The Spanish two-year yield advanced five basis points to 3.22 percent.

Euro-area countries lending to Greece should seek a region-wide arrangement on collateral and not bilateral accords, Estonian Finance Minister Juergen Ligi said in an e-mailed response to questions.

“A common agreement with Greece is the real collateral that ensures equal treatment to all creditor countries as well as Greece’s reforms,” he said, adding that collateral provided to an individual lender goes against “the spirit of euro zone cooperation.”

Decisive Weeks

Waiglein said efforts to secure collateral deals are unlikely to delay the implementation of measures agreed July 21.

The “next weeks are very decisive in that we will see how other countries will respond to this collateral arrangement,” Finland’s Urpilainen said.

Greece won a second bailout after a previous 110 billion-euro package failed to prevent the spread of Europe’s debt crisis. The new plan includes 50 billion euros in contributions from private investors through bond exchanges and buybacks to cut Europe’s biggest debt load.

A Greek Finance Ministry press officer who declined to be identified by name because of ministry rules had no comment on the possible additional requests for a collateral arrangement. Austria’s demands were first reported by Helsinki-based newspaper Helsingin Sanomat.

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at; Zoe Schneeweiss in Vienna at

To contact the editors responsible for this story: Tasneem Brogger at; Angela Cullen at

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