News / Europe

Finland Becomes Obstacle in Path of New Greek Bailout

European Commission official Matthias Mors arrives at the Greek Development Ministry in Athens, August 30, 2011
European Commission official Matthias Mors arrives at the Greek Development Ministry in Athens, August 30, 2011

Finland has thrown an obstacle in the path of Greece's new $158 billion international bailout, demanding that it get collateral from Athens to secure its investment in the deal.

Barely a month ago, the 17 nations that use the common euro currency agreed to Greece's second round of financial assistance in two years to help the debt-laden nation overcome its financial woes. But "bailout fatigue" has since consumed some northern European nations, where opposition has grown against more financial assistance for Greece or new help for countries with huge debts, such as Italy and Spain.

Nowhere is that opposition more pronounced than in Finland.  The Helsinki government is trying to reach a collateral agreement with Greece under which Athens would post cash in accounts that would cover at least part of the $2 billion Finnish share of the bailout.  Greece would get the money back if it repays the bailout, plus income from the interest on the account.

The concept of a bilateral collateral agreement between Finland and Greece has drawn the ire of other European countries.  They want the 17 nations to complete the deal in unison, to show common support for the euro, and say that Finland should not be able to negotiate separate, preferable terms.

European officials said Tuesday they are making progress on working out an agreement to complete the Greek bailout, but may not be able to complete a pact until their finance ministers meet in mid-September.

In Finland, the True Finn party, which is opposed to further help for Greece without a collateral agreement, surged in spring elections.  Opposition to more Greek assistance has also risen in Germany, the Netherlands, Slovakia and Austria.  

Meanwhile, a new report shows confidence in the European economic outlook is waning.  The European Commission survey of executive and consumer sentiment fell in August at the fastest rate since December 2008, at the outset of the global economic downturn.

European economic growth has slowed in recent months as several governments have embarked on austerity spending programs to trim their deficits.

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