LUXEMBORG (MNI) – The Eurogroup has reached a deal to address
Finland’s demand for collateral to guarantee loans it makes to Greece,
EU Economic and Monetary Affairs Commissioner Olli Rehn and EFSF head
Klaus Regling said early Tuesday.
The decision removes one major obstacle to fully implementing
decisions taken on July 21 for a new E109 billion bailout for Athens.
“Concerning the collateral issue, I note positively the Eurozone
agreement on collateral as a balanced and fair solution and I am
satisfied that the issue is now out of the agenda,” Rehn said.
The concern was that several states, though not demanding
collateral, had indicated that if Finland got it they would also request
it.
While all member states will have the right to demand collateral to
secure future loans — as required by principles of equal treatment —
conditions will be so unattractive that no country but Finland will
actually ask for it, policymakers said.
“The deal in principal is open to all member states. Any euro area
member state can request such a deal but at the same time there is a
price to be paid,” Regling explained.
Juncker said that all other member state have indeed already
indicated that they would not take up the offer.
Citing some of the costs, Regling said “countries that do receive
collateral have the obligation to pay their capital in the future ESM in
one tranche in the first year” as opposed to the five years for all
other member states.
“Secondly, profits from the EFSF for countries that receive
collateral will be reduced…In case of default the collateral will only
be repaid at time the EFSF loans matures,” Regling said.
Collateral will likely be provided in the form of Greek government
bonds that would be transferred to a trustee who would then seal and
invest the proceeds in AAA-rated bonds of the same maturity as those
issued by the EFSF.
–pkoh@marketnews.com, jtreeck@marketnews.com
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