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Malta asks for collateral on Greek loan in bid for equal treatment

Greek policemen and firemen staged a protest outside the German embassy in central Athens, yesterday. Greece is swept by strikes and demonstrations amid new budget cuts as European stocks plunged, with doubts growing that the government can force through the latest EU-IMF conditions for funds to avert default and resulting chaos in the eurozone. Photo: AFP

Greek policemen and firemen staged a protest outside the German embassy in central Athens, yesterday. Greece is swept by strikes and demonstrations amid new budget cuts as European stocks plunged, with doubts growing that the government can force through the latest EU-IMF conditions for funds to avert default and resulting chaos in the eurozone. Photo: AFP

Malta has asked for collateral to secure its own guarantees on the second Greek bailout, insisting that all eurozone member states should be treated equally.

Finance Minister Tonio Fenech said Malta had officially asked to be treated on the same lines as Finland, which was the first eurozone member to ask for collateral as a guarantee for its loans to Greece.

“I can confirm that at a recent meeting of the Eurogroup in Poland, Malta officially requested to be treated like Finland where it comes to collateral. All member states should be treated the same and we are insisting on this,” Minister Fenech said.

The second bailout agreement to Greece, totalling €109 billion, was agreed by the eurozone member states last July but has still to be ratified by all of them. Finland, a founding member of the eurozone, has insisted it will not be taking part if it is not offered collateral.

Although many member states, particularly the big lenders like Germany, were against the idea, Finland stuck to its guns and managed to strike a bilateral deal with the Greek government.

This irked other member states like Malta, who had already made loans to Greece last year without any requests for collateral.

Now, Malta has decided to strike the same position as Finland, arguing that all member states should be treated equally on their exposure.

“Such an arrangement (between Greece and Finland) creates an unlevel playing field between the creditor countries and if such an agreement is implemented, it would mean that the other creditor countries would be guaranteeing Finland,” a senior government official told The Times.

“This is deemed unacceptable by Malta and so we requested equal treatment including on any collateral arrangements.”

EU sources yesterday said that apart from Malta, the Netherlands and Austria were also demanding collateral for their part of the loan.

Although Malta this time is not forking out a direct loan to Greece, as the money will be coming out of a €440 billion European Financial Stability Facility (EFSF) rescue fund, the island will still be guaranteeing €400 million.

Last year, Malta agreed to lend Greece €75 million over a number of years in the first bailout aimed at saving the Greek economy from collapse.

EU sources said the issue of the Finnish collateral was more a political than economic issue. Finnish public opinion is increasingly critical of the government for its assistance to the Greek economy while introducing austerity measures at home. The collateral demand was intended to placate that criticism.

Also, it is not yet known what type of collateral Greece can offer to its eurozone partners.

According to EU sources, “the Greek economy is not really in a position to give many guarantees and securities on its borrowing”.

Many economists are predicting a Greek default by the end of this year even though the euro area is doing its utmost to avoid one.

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