How long Finland and the Netherlands are willing to put up with not having a say in how the ESM (or anything else in the EMU runs) remains to be seen, but both countries expect collateral for any loans to Spain.
Bloomberg reports Finland Firm on Collateral as Spain Aid Terms Discussed
Finland underlined its determination to get collateral in exchange for loans to Spain’s banks as the Nordic country targets similar terms to those won last year on its contribution to Greece’s second bailout.
“We have the requirements of collateral on the loans that are from the temporary vehicle,” Jukka Pekkarinen, director general at the Finnish Finance Ministry in Helsinki, said in an interview in Oslo yesterday. “The details are still open, but the principle standpoint is the same” as in the case of Greece, he said.
Finland, one of only four AAA rated nations left in the euro area, threatened to hamper efforts to agree on a second bailout for Greece by insisting on collateral last year. The Nordic country was the only nation to negotiate security in exchange for loans from the temporary fund, or the European Financial Stability Facility, because the vehicle doesn’t give its creditors preferred status.
The Nordic country yesterday questioned the ability of the permanent rescue fund, the ESM, to purchase bonds through the secondary market. Finland, which opposes such purchases, argues the process would require unanimity inside the euro area to be possible.
There exists no unanimous agreement on the bond purchases because Finland and the Netherlands reject the model, the Finnish government said in a report dated June 29 and presented yesterday by Prime Minister Jyrki Katainen to the parliament’s Grand Committee in Helsinki. The government reiterated its opposition today, citing the rescue funds’ limited resources and the shown “ineffectiveness” of bond purchases.
Spain’s Economy Minister Luis de Guindos said today that the two countries won’t be able to block Spain from receiving aid via the euro region’s permanent rescue fund.
“There is a fundamental point in the ESM and that is that decisions are taken with a qualified majority, not unanimously,” de Guindos told journalists in Madrid. “I don’t want to go into calculations but Holland and Finland won’t have the capacity to block an agreement.”
The rules of the ESM include an emergency voting procedure, which requires a qualified majority of 85 percent of the votes cast if the European Commission and the European Central Bank see a threat to the economic and financial sustainability of the euro area. Finland’s parliament voted on June 21 to approve the permanent bailout fund and the Dutch upper house of parliament approved it today.
German Chancellor Angela Merkel declined to take sides in the dispute over sovereign-bond buying, saying “we have to respect” Finland’s opposition to such aid. Conditions for emergency financial aid to euro countries will be decided case by case, she said in Berlin today.
Mike “Mish” Shedlock
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