Bank of Finland Governor Erkki Liikanen says movement on monetary markets has been surprisingly subdued after Greece’s decision to hold a referendum on EU bailout solutions Sunday. Speaking on Tuesday to the Finance Committee of the Parliament, Liikanen assured his listeners that the European Central Bank has the means to intervene if the need arises. He hesitates to offer his opinion on the merits of the referendum itself, however.
“I err on the side of caution when it comes to another country’s internal affairs. I don’t really care to take a position on the matter,” he said.
Long considered a financial guru in Finland, Liikanen says everything is now in the hands of the Greeks.
”It is extremely important that they have access to a comprehensive array of information on everything a yes or no decision entails,” he said.
He says the underlying premise must be that Greece will remain a member of the eurozone.
“A solution in which Greece is able to balance its economy and also remain a part of the euro would be ideal for everyone,” Liikanen commented.
Finland can claim 900 million in collateral
Former Ministry of Finance Chief Raimo Sailas was quoted in Finland’s leading financial daily on Tuesday as saying Finland can kiss its loan money to Greece goodbye. MP and fellow Social Democratic Party member Jutta Urpilainen responded to his comment that same morning.
“I disagree with Sailas that we should throw up our hands and accept that Greece will never pay a thing,” the former finance minister said Urpilainen in a morning television interview.
She says it is clear that if Greece were to leave the euro, negotiations with regards to debt restructuring would follow as a matter of course. Urpilainen says she has faith that restructuring does not necessarily mean that Greece would never pay back a dime.
“Keep in mind that Finland’s interests are also safeguarded with collateral guarantees to the tune of 900 million euros,” she said.
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan, serving as protection for a lender against a borrower's default. Urpilainen says she all the same hopes that Greece will not exit the eurozone and that the situation could be stabilized.
Finland’s outstanding loans to Greece are estimated at seven billion euros, according to the Ministry of Finance. The market value of the collateral secured as part of the negotiated loan package totals some 930 million euros.
Request for new third bailout
Tuesday evening the Greek government requested a new bailout deal from the eurozone, just hours before the deadline for 1.6 billion euros in repayment to the International Monetary Fund came due.
This last-minute request suggests a new two-year 29.1 billion euro aid deal that involves borrowing money from the eurozone's permanent bailout fund, the European Stability Mechanism. This money is expected to cover the Mediterranean country’s debt repayments until the end of 2017.
Eurozone finance ministers will discuss the latest Greek offer in a teleconference Tuesday evening.