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Finnish demand for collateral requirements granted but with a significant price

Tuesday, 04 October 2011
Finland demand for collateral requirements as a means to shed them from any fall out from the Greek crisis has been met. In that vein, the Slovak Government declares that it will approve EFSF-expansion. But the new emergency loans to Greece is being delayed, information made clear after the euro zone's finance minister meeting.

Euro Group have agreed on a model for dealing with Finland's collateral requirements for the additional aid package to Greece, as EU Commissioner Olli Rehn said
Thus, a major obstacle for the second support program for the indebted country is eliminated.
At the same time Eurogroup Chairman Jean-Claude Juncker, says the Slovak government assurances that the Slovak government coalition agrees on the issue of an expansion of the eurozone crisis fund EFSF.
 
According to Klaus Regling, head of EFSF, all euro area countries require the same type of security such as Finland.
“But it has its price, which must be paid. That makes it unlikely that any other country than Finland will request collateral,” he says.
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Those who require security impact, according Regling, are affected in several ways, including by getting a lower interest rate than other European countries on EFSF loans.

The terms include Finland making a one-time payment of 1.4 billion euros to the permanent eurozone bailout fund (ESM) in 2013. Other eurozone states will meanwhile pay their share in five installments over the next five years. In addition, Finland will receive a lower interest rate on its loan than others in the bloc.

The extraordinary meeting of the euro countries' finance ministers on 13 October, is set according to Jean-Claude Juncker. The reason is that the inspectors from the EU, the ECB and the IMF, the so-called Troika, will not have time to clear the examination of Greece's emergency policies resumed after the sudden break in September.

He adds that the euro countries put forward demands for additional requirements for austerity measures in Greece, to secure the debt and fiscal consolidation from 2013 to 2014.
According to Juncker it does not change in the timetable that Greece will give up its financial commitments.

As for Finland's collateral, it will be frozen for a very long period. In case of a default, it will only be paid out at a time when temporary fund (EFSF) loans mature in 15 to 30 years.
"Finland received good guarantees that limit Finnish taxpayers' risk, which is what we have been seeking all along," said Finance Minister Jutta Urpilainen who represented Finland at the meeting in Luxemburg on Monday.


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