Finnish demands for collateral from Greece under threat

[Tiriol]

Source: Helsingin Sanomat international edition (in English)

German Chancellor opposes Finnish demands for collateral for Greek loan guarantees
Many Finnish politicians willing to consider alternatives

German Chancellor Angela Merkel has come out against the agreement between Greece and Finland that Greece should provide collateral for loan guarantees from Finland as a condition for Finnish participation in the eurozone bailout of Greece.
Speaking in Berlin to representatives of her Christian Democratic Party and its Bavarian sister party, the Christian Social Union, Merkel was reported as saying that agreements such as the one between Finland and Greece are not acceptable.

Finnish Prime Minister Jyrki Katainen (Nat. Coalition Party) said on Tuesday evening that he has not discussed the matter with Merkel.
“The situation has not changed at all from today [Tuesday]. A technical solution exists, but no political decisions have been made on the level of the euro group”, Katainen said.
Earlier on Tuesday Katainen said that Finland does not want to hurt other countries. He said that a solution is currently being sought among other EU countries. Katainen also gave assurances that Finland would rather reject the whole support package than give up the collateral arrangement that it agreed with Greece.

Meanwhile, Miapetra Kumpula-Natri (SDP), the chairwoman of the Grand Committee of the Finnish Parliament, which oversees EU policy, does not completely reject the idea that Finland might take part in backing Greece’s loans without collateral.
She says that the matter will come under consideration if the support package threatens to fall and if the whole eurozone threatens to fall into a serious crisis over Finnish intransigence. Previously the Social Democrats have been very insistent that Finland should not be involved in lending to countries in a crisis without guarantees.

Now the tones are more conciliatory.
“Finland needs to look at the overall picture. We are looking for guarantees, but by no means do we want to topple the euro”, Kumpula-Natri said on Tuesday before Merkel had made her statement.
Also taking the conciliatory line was Kimmo Sasi (Nat. Coalition Party) who feels that it would be a very severe decision on Finland’s part to scuttle the whole package.

The Greens are also distancing themselves from the all-or-nothing stance.
“Sure, we’ll hold on to the collateral, but if it doesn’t work, then what? There needs to be a plan B”, said Green League chairman Ville Niinistö at a meeting of the party’s leaders in Turku on Tuesday.
If Finland ends up not taking part in the support for Greece, then Niinistö says that the government must help in the making of a solution at the very least – “so that at least we don’t make it fail”.

In the view of Juha Jokela, director of the EU research programme of the Finnish Institute of International Affairs, remaining outside the Greek bailout packages would be a politically difficult decision.
The euro countries decided in July on a new EUR 109 billion support package for Greece. If Finland opts out of the plan, the additional support for the bailout would have to be renegotiated.
"If it proves that the European Stability Mechanism cannot be used as planned, it will further add to market uncertainty.”

If the current government backs down from the collateral, I predict that their political parties will suffer major losses in every election in the future. Whether true or not, many Finns feel that they are forced to go out of their way to help Greece - and to give bailouts to the banks who gave loans to Greece, mostly British and German (and French? I can't remember) branks. The True Finns (I refuse to call them by their new official name) will have a field day with this.

[Edi]

The idiots made it an all or nothing proposal in the beginning, so now if they back down, they lose face and credibility with everyone and if they don't back down, they piss off everyone except the Finnish public, thus damaging future prospects in any negotiations.

I suppose the Finnish government has to fold this time, but that will make it virtually impossible politically to participate in any future bailouts of anyone. At that point Finland is either going to sit out the next round of bailouts or come next election there will be a True Finns government.

While I loathe that particular troglodyte party, I oppose any further bailouts of the southern eurozone countries with Finnish money. If someone else wants to bail out German or British banks' bad loans and the southern countries' irresponsibility, let them, but we should have no part of it.

[Tiriol]

The idiots made it an all or nothing proposal in the beginning, so now if they back down, they lose face and credibility with everyone and if they don't back down, they piss off everyone except the Finnish public, thus damaging future prospects in any negotiations.

I suppose the Finnish government has to fold this time, but that will make it virtually impossible politically to participate in any future bailouts of anyone. At that point Finland is either going to sit out the next round of bailouts or come next election there will be a True Finns government.

While I loathe that particular troglodyte party, I oppose any further bailouts of the southern eurozone countries with Finnish money. If someone else wants to bail out German or British banks' bad loans and the southern countries' irresponsibility, let them, but we should have no part of it.

Oh, I wouldn't be even that optimistic - if they now back down the public in Finland will perceive the sitting government as weak and completely beholden to the EU, incapable of defending Finnish national interests and more concerned about some bankrupt southern countries and irresponsible banks than about Finnish unemployed etc. True Finns will have a collective orgasm because they will win in every election after that. And if the government doesn't back down, every other EU country will blame Finland for being uppity and our position weakens internationally. And the True Finns will still gain popularity ("Those damn foreigners are telling US what to do? Why do we care about 'em? Timo Soini would show 'em!!!") but not as much as in the previous scenario.

Quite frankly the established political parties have no one else to blame but themselves: by allowing the True Finns to dictate the political game and the terms of that game they have made themselves weak, not to mention the fact that it took them all too long to realize that no, being a bureaucrat and unable to grasp the situation and the opinion of the ordinary folk will not win you any friends. At least Soini, even though his ilk is loathsome, knows how to rouse interest and actual support.

[K. A. Pital]

I don't see a reason why Finland should bailout French and German banks, who are major debtholders of periphery debts. I haven't seen Finland throwing money around or advocating reckless tax cuts that slash government income base.

Finland can tell Germany to stuff it, though - that would be enormously funny to observe. The rage of the Euromaster would be a sight to behold.

[Edi]

The idiots made it an all or nothing proposal in the beginning, so now if they back down, they lose face and credibility with everyone and if they don't back down, they piss off everyone except the Finnish public, thus damaging future prospects in any negotiations.

I suppose the Finnish government has to fold this time, but that will make it virtually impossible politically to participate in any future bailouts of anyone. At that point Finland is either going to sit out the next round of bailouts or come next election there will be a True Finns government.

While I loathe that particular troglodyte party, I oppose any further bailouts of the southern eurozone countries with Finnish money. If someone else wants to bail out German or British banks' bad loans and the southern countries' irresponsibility, let them, but we should have no part of it.

Oh, I wouldn't be even that optimistic - [snip]

Er, I was being optimistic?

In any case, can't really argue with what you said there.

[Thanas]

Finland can tell Germany to stuff it, though - that would be enormously funny to observe. The rage of the Euromaster would be a sight to behold.

Please describe the ways in which Germany is the master of Europe.

[K. A. Pital]

Please describe the ways in which Germany is the master of Europe.

Financially. Germany simply happened to have the biggest economy and also government finances more or less in order, compared to the others - including France. So Germany decides who gets rescued and who gets the sharp end of the stick, Germany can also decide who pays what and how, given the economic leverage it has as the central Euro nation.

In all other ways Germany is just a European nation.

[Thanas]

Please describe the ways in which Germany is the master of Europe.

Financially. Germany simply happened to have the biggest economy and also government finances more or less in order, compared to the others - including France. So Germany decides who gets rescued and who gets the sharp end of the stick, Germany can also decide who pays what and how, given the economic leverage it has as the central Euro nation.

If anything has been shown in the latest months it is that Germany is getting pretty much pushed around when it comes to the bailouts by the Commission. If Merkel had her way, there would be no Eurobonds, the EZB would not be able to purchase government bonds and Germany would not spent that much.

Meanwhile, look at who got what available posts in Europe. That tells a lot more about the relative power of nations.

[Thanas]

Also: German banks are not having that much money invested in Greece anyway. Spain and Italy are the real kickers.

German banks and where they have invested their money.

[Bluewolf]

Why so much in the UK?

[Thanas]

Why so much in the UK?

Because British companies and banks like to borrow money from German banks? More seriously, it may just be that a lot of companies are listed in London due to the easy British company law.

[K. A. Pital]

Yeah, I know the biggest abusers of periphery debt are Italy, Spain and France. Two of which are periphery themselves.

Meanwhile, look at who got what available posts in Europe. That tells a lot more about the relative power of nations.

You mean France and Belgium?

[Thanas]

Yeah, I know the biggest abusers of periphery debt are Italy, Spain and France. Two of which are periphery themselves.

Meanwhile, look at who got what available posts in Europe. That tells a lot more about the relative power of nations.

You mean France and Belgium?

More the recent announcement of deputy posting and section leader in the EU commission. Germany has one and 2 deputies, while the French and Brits are very good at grapping posts.

[Oberleutnant]

I've pretty much lost all my EU-optimism by this point, having experienced first hand how self-contained it has become. It seems that the EU serves only one purpose; to justify its own existence by creating new programs and projects with minimal impact. Aside from agricultural subisidies, the only money member countries receive back goes for project workers and consultants. Throw in blatant expenses and financial insanity and we have a monster that doesn't help any of its members.

Having said that it's a shame that Finland is supposedly known in EU circles as a country that rarely holds its stance, unlike Poland or France. Finland made it clear in the spring that it's not participating in the bailout unless it gets the collateral. This shouldn't come as a surprise to anyone, so it's pretty clear the Germans, Dutch and Slovenians are just leveraging their negotiating power by expressing their disagreement at the last minute. A fine example of how nasty politics can get in the EU.

If the Finnish government backs out, it will mean that it's only a matter of time when The Finns (the nationalist party known before as the True Finns) gains the PM's seat. Then it will be interesting to see how rest of the EU deals with an outright difficult opponent that doesn't think twice about using the veto over important matters. It would have just been easier, if other EU members had let this collateral thing pass.

[Thanas]

They can't let it pass.

[White Haven]

Isn't collateral the entire idea that makes loaning to a risky recipient not hysterically stupid? I'm...really not following why the EU is viewing that as a calamity in this case.

[Thanas]

Isn't collateral the entire idea that makes loaning to a risky recipient not hysterically stupid? I'm...really not following why the EU is viewing that as a calamity in this case.

What is supposed to serve as collateral? If all EU nations demand one, then what is going to serve as collateral? Do German Agents go around and plant stickers on the chair of the PM of Greece?

[Terralthra]

I suggest putting Crete up as collateral. Maybe Rhodes and Lesbos too.

[Nieztchean Uber-Amoeba]

Clearly the British Museum needs more Hellenic artefacts.

The Pergamon could have some too!

[Starglider]

What is supposed to serve as collateral? If all EU nations demand one, then what is going to serve as collateral? Do German Agents go around and plant stickers on the chair of the PM of Greece?

It's quite simple. Finland deserves to have collateral, as it was dragged kicking and screaming into this bailout by France and Germany. Germany and France do not deserve to have any collateral, as they are the ones forcing this futile attempt to deny reality and prevent normalisation of Greek finances on the rest of Europe.

[Thanas]

What is supposed to serve as collateral? If all EU nations demand one, then what is going to serve as collateral? Do German Agents go around and plant stickers on the chair of the PM of Greece?

It's quite simple. Finland deserves to have collateral, as it was dragged kicking and screaming into this bailout by France and Germany. Germany and France do not deserve to have any collateral, as they are the ones forcing this futile attempt to deny reality and prevent normalisation of Greek finances on the rest of Europe.

Germany was dragged into it as well by pressure from several other nations. And again, how is a collateral going to work?

[Simon_Jester]

Well, what assets does the Greek government own? Land? Buildings?

If some of the money is going to Greek banks (I simply do not know the details here), what assets do the banks own?

[Starglider]

Well, what assets does the Greek government own? Land? Buildings?

112 tonnes of gold (current value approx $7 billion), more than sufficient to cover the Finnish contribution. Of course, not nearly enough to provide a useful margin on the whole bailout...

Seriously, everyone involved would be far better off if the politicians admitted that this is a straight transfer payment, rather than a loan with any hope of repayment. German exports benefited from the weak euro, now it can pay the cost; de facto fiscal union and indefinite subsidy to the PIIGS.

[Argosh]

Well, what assets does the Greek government own? Land? Buildings?

112 tonnes of gold (current value approx $7 billion), more than sufficient to cover the Finnish contribution. Of course, not nearly enough to provide a useful margin on the whole bailout...

You know, the Greek could sell that gold?

[Thanas]

And how are you going to enforce that collateral, Starglider? And do you realize what will happen next? Every nation will scream for a collateral and that will scuttle the bailout.