Greek deal in doubt as EU members seek collateral
Published 20/08/2011 | 05:00
The eurozone's hard-won deal overhauling its rescue fund and extending Greece a €109bn bailout is not in doubt, Greece's finance minister insisted yesterday, despite five countries' demands for collateral in exchange for their contributions.
Evangelos Venizelos also said the recession in his financially troubled country could be deeper than originally predicted for this year, with output potentially shrinking by more than 4.5pc.
His comments came a day after The Netherlands, Slovenia, Austria and Slovakia said they wanted hundreds of millions of euros in collateral like Finland, which struck a deal with the Greek government earlier in the week to receive cash as security for its part of the bailout.
The demands have laid bare the divisions within Europe over how to deal with its debt crisis, which has already seen Greece, Ireland and Portugal bailed out, and has threatened the far larger economies of Spain and Italy.
Although the amount of cash being demanded by the five would probably not be large enough to sink the deal, it could drive up the overall cost of the bailout, which was part of a July 21 eurozone agreement that gave the 17-country eurozone new powers designed to help a country before it is in full crisis.
The deal "is not in doubt, because it is of vital importance to the eurozone", Mr Venizelos said, adding that the agreement was not just about his country.
"It is a decision that concerns Greece as part of a much more general problem," he said.
The European Commission raised objections to the idea of collateral in return for participating in the Greek bailout.
"The commission considers that we should avoid introducing too many new conditions, or excessive collateralisation, to have a rapid implementation of the decision and a strong. . . financing of the new program for Greece," said Amadeu Altafaj Tardio, spokesman for the EU's Monetary Affairs Commissioner Olli Rehn.
The exact amount of each country's share of the €109bn rescue is not clear yet, because the IMF has not said how much it will provide and Greece is still negotiating easier debt repayment terms with banks and other private lenders.
A lower contribution from the private sector or extra collateral costs could require the eurozone and the IMF to put up more than the €109bn they initially agreed on.
Mr Venizelos stressed the collateral deal with Finland depended on approval by other eurozone members.
Representatives from eurozone finance ministries were discussing the Finnish deal and any requests from other countries at meetings in Brussels but were not expected to reach a conclusion this week. (AP)