The collateral deals some European countries are seeking in return for their contribution to the second rescue package for Greece could delay the next bailout payment to the Balkan country and lead to its default, credit ratings agency Moody's warned.
Under an agreement reached last week, Athens committed to provide cash as a guarantee for Finland's participation in the Eurozone's 109-billion euro loan package for debt-laden Greece, announced on July 21st.
That prompted calls from Austria, the Netherlands, Slovakia and Slovenia for similar bilateral arrangements.
Moody's, which lowered Greece's rating to Ca, just one step above default, about a month ago, cautioned on Monday that a proliferation of collateral deals would be credit-negative for the country.
"The agreement between Greece and Finland, which is small by itself, assumes much greater significance. The pursuit of such agreements could delay the next tranche of financial support for Greece and so precipitate a payment default," the agency said.
Athens expects to receive the next installment of 8 billion euros under its first international bailout, worth 110 billion euros, in September.
Greek Finance Minister Evangelos Venizelos said that there is no risk of his country not getting that money due to the recent deal with Helsinki.
"September's borrowing requirements will be covered either way," Greek daily Kathimerini quoted him as saying Monday. "This has been decided."
But the tensions that have emerged within the Eurozone over the collateral agreement with Finland could slow down the process of implementation of the second Greek bailout, aimed at covering Athens's borrowing needs until the middle of 2014. The rescue package needs to be approved by all members of the euro club to be enacted.
The July 21st agreement reached by the leaders of the Eurozone countries also envisions an additional 50 billion euros from banks and other private creditors.
Speaking at a regular government press briefing in Berlin on Monday, German officials said that the Greek-Finnish deal must be explained, discussed and also approved by the other members of the euro area, according to AFP.
"Such a bilateral accord may not be agreed to the detriment" of the other countries in the club of EU member states using the euro as their national currency, the news agency quoted a German finance ministry spokesman as saying.
Meanwhile, Dutch Finance Minister Jan Kees de Jager contested the legality of the Greek-Finnish deal in an open letter to the national parliament, saying it would only become valid if all other Eurozone countries and the IMF agree to it.
"The Netherlands is no supporter of this proposal," Brussels-based Euobserver cited the minister as also noting. "It is not compatible with the principle of equal treatment of all euro countries," he added three days after Dutch Prime Minister Mark Rutte's statement on Friday that said while there was no need for collateral deals, if Finland got one, he wanted one too.
The Netherlands has thus made clear its opposition to an Austrian proposal last week, calling for restricting euro members' access to collateral deals if their banks are already benefiting from the provisions under the private sector portion of the rescue package. A Dutch veto could thus block the second bailout for Greece.
- Provided by Southeast European Times
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