Greco-Finnish deal reopens bail-out debate

Greece’s new €109bn bail-out came closer to unravelling on Monday amid a growing dispute over a side deal struck between Finland and Athens, with the Dutch government questioning the arrangement’s legality and a leading credit rating agency warning it could undermine all eurozone bail-outs.The Greco-Finnish collateral deal, reached last week between the countries’ two finance ministers, would force Athens to deposit millions of euros in cash into an escrow account, as insurance that Greece would not default on Helsinki’s portion of the rescue. But the deal – tacitly allowed by eurozone leaders at their emergency summit last month – has reopened the debate over the entire bail-out, with some countries, including Austria, Slovenia and Slovakia, insisting they want similar deals.Moody’s Investor Service said on Monday that the sudden proliferation of collateral requests could sap Greece of financial resources, and raised new questions about eurozone countries’ willingness to continue bailing out heavily indebted fellow members.“The message sent by the calls for such agreements confirms that Europe is conflicted over the very decision to provide financial support to its members, not just the amount of support,” Moody’s wrote.The most strenuous objection came on Monday from the Netherlands, which had originally said it might also push for a collateral deal if the Finnish plan was approved. Although Dutch officials said they did not object to collateral in principle, the country was poised to block the Finnish plan because of the cash involved, which would come directly from the eurozone loans. “The Netherlands is no supporter of this proposal,” said Jan Kees de Jager, the Dutch finance minister. “It is not compatible with the principle of equal treatment of all euro countries.”A Dutch veto could halt the entire bail-out, as all 17 eurozone countries must approve the both the Greek rescue and the Finnish side deal. Helsinki has repeatedly said it cannot participate in the rescue without a collateral deal and most physical Greek state assets are already committed to a €50bn privatisation scheme.The issue was due to be settled last week during a meeting of mid-level finance ministry officials in Brussels, but a European official said it was moved to more senior levels in national capitals this week and might eventually have to be debated by heads of government. “It’s a very difficult discussion,” said the official. “The others have to face their national parliaments and explain why one country gets preferential treatment.”The Finnish deal came about because of rising anti-bail-out sentiment in Finland’s April national elections. In order to win over coalition partners, prime minister Jyrki Katainen was forced to agree to seek collateral deals in any future bail-out.