Doubts about Greek-Finnish collateral deal growing

Finance Minister Evangelos Venizelos insisted on Monday that growing complications over its collateral deal with Finland would not derail the 8-billion-euro loan installment Athens expects next month, but the agreement with Helsinki is becoming a major distraction in the eurozone rubber stamping the second bailout for Greece.

?September?s borrowing requirements will be covered either way,? said Venizelos. ?This has been decided.?

However, Moody?s ratings agency added its voice to those expressing concern about Athens striking a deal to provide Finland with cash collateral in exchange for its participation in the 109-billion-euro package. The agency suggested the issue could scupper the eurozone bailout for Greece, leading to the country defaulting.

?The agreement between Greece and Finland, which is small by itself, assumes much greater significance,? said Moody?s. ?The pursuit of such agreements could delay the next tranche of financial support for Greece and so precipitate a payment default.?

Venizelos, who asked for the European Central Bank and the European Union to help find a resolution, said that the statement by Moody?s may prompt some action. ?Moody?s statement carries weight,? he said. ?I want to find a solution that makes it easier for Finland to approve the aid but what?s key is not to disturb the eurozone?s relation with the markets.?

The deal Venizelos reached with his Finnish counterpart Jutta Urpilainen would see Greece deposit cash equivalent to part of the Finnish loan in an account used to invest in AAA-rated bonds. The interest generated will raise the amount to match the required collateral.

However, news of the agreement prompted other eurozone members such as the Netherlands, Austria and Slovakia to ask for similar deals. On Monday, Dutch Finance Minister Jan Kees de Jager suggested that the Greek-Finnish deal was not legal but insisted that the Netherlands would pursue a similar deal to ensure it receives the same treatment as other lenders.

The pact with Helsinki has given New Democracy fresh ammunition to fire at Venizelos. The conservative party?s spokesman, Yiannis Michelakis, accused the minister of jeopardizing the bailout agreement. ?Mr Venizelos?s amateur handling is threatening to blow sky high the positive aspects of the July 21 deal,? he said, adding that Venizelos was asking the Europeans to resolve the problem created by his own ?gaffe.?