European countries demand collateral for loans to Greece

 
Elizabeth Fournier
SEVERAL European countries are demanding collateral on bailout loans they provide to Greece, after it emerged that Finland had secured a commitment earlier this week.

Austria, the Netherlands and Slovakia added their voices to the demand for collateral to secure their commitments to Greece via the European Financial Stability Facility, despite senior Greek government sources saying no discussions had taken place with countries other than Finland.

“If there is to be a model for collateral, Austria would also make a claim,” a spokesman for the country’s finance ministry said.

But other Eurozone countries have been quick to criticise the idea of demanding collateral, amid fears it could undermine the bailout agreement made last month, which provides €109bn (£95bn) in emergency funding through the EFSF.

Francois Cabau, an economist at Barclays Capital, said Finland’s insistence on collateral could threaten the process.

“By agreeing to [collateral] ... you actually do the opposite of what you originally set out to do, withdrawing cash from ... somewhere that doesn’t have any,” he said. “This is likely to provoke some annoying political noise in the market.”