Austrians, Dutch follow Finns, seek Greek collateral

VIENNA/AMSTERDAM Thu Aug 18, 2011 4:04pm BST

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VIENNA/AMSTERDAM (Reuters) - Austria, the Netherlands and Slovakia said on Thursday they want collateral on loans to Greece after Finland secured a commitment, raising question marks over a second bailout agreed for Athens last month.

The three countries said their positions were not new and echoed the view of some other euro zone states.

They and the Finns account for only something like 11 percent of the new Greek bailout which totals 109 billion euros (93.2 billion pounds).

But new signs of discord will do nothing to encourage markets that euro zone politicians are getting on top of the debt crisis, after a blueprint from the leaders of Germany and France underwhelmed investors earlier this week.

"With more of Greece's euro zone partners asking for collateral for their contribution to the second rescue package, the available pool of money becomes smaller, rendering the success of the second package more difficult," said Theodore Krintas, head of wealth management at Attica Bank in Greece.

Athens and Helsinki agreed on a deal for collateral this week -- proposing that Greece offers Finland a cash deposit to back loans made under the July 21 bailout deal.

Finland has said the deposit plus interest would be comparable to the contribution it makes to Greece via Europe's temporary bailout fund.

Francois Cabau, economist at Barclays Capital, said Finland's insistence on collateral could threaten the process.

"By agreeing to (collateral) ... you actually do the opposite of what you originally set out to do, withdrawing cash from ... somewhere that doesn't have any," he said. "This is likely to provoke some annoying political noise in the market."

The Finnish finance ministry said officials from euro zone countries' finance ministries would discuss the plan at a meeting in Brussels on Thursday and Friday.

Austria's Finance Ministry said it had made its position clear before and that its latest comments were in line with what euro zone leaders agreed at the July 21 summit.

"If there is to be a model for collateral, Austria would also make a claim," spokesman Harald Waiglein said.

"UNBELIEVABLE PANDERING"

The Netherlands took a similar line.

"Even if it was not a hard demand from parliament we, together with some other countries, have always indicated to Brussels and Finland that if Finland gets collateral our credit ranking position cannot worsen, and that we ourselves also want a collateral agreement," a finance ministry spokesman said.

Analyst Sassan Ghahramani at SGH Macro Advisers took a sceptical view.

"There was an explicit carve out agreed at the July 21 summit. For them to now put their hand up and say we kind of wanted it all along is unbelievable pandering to their domestic base. It must be frustrating, Brussels has to draw the line, crack the whip," Ghahramani said.

A Greek finance ministry official declined to comment and referred to upcoming talks on the Greek-Finland deal in a working group.

The July summit of euro zone leaders, which sought to prevent market instability spreading through the region, agreed to give Europe's financial rescue fund new powers to help Greece to overcome its debt crisis.

But since then euro zone states have squabbled over measures to stabilise the region. Bold plans from France and Germany this week to move towards fiscal union in 2012 got a cool response from Austria, Finland and Ireland.

And the failure by Nicolas Sarkozy and Angela Merkel to address burning issues such as common euro zone bond issuance or beefing up the bloc's rescue fund left investors cold, although the European Central Bank's reluctant agreement to buy the bonds of Italy and Spain has tempered the latest market onslaught.

Waiglein said Slovenia, Slovakia and the Netherlands shared Austria's view on Greek collateral during expert talks.

In Ljubljana, the Slovenian finance ministry said only it aimed to ensure its share of guarantees within the joint euro zone framework in talks about possible insurance mechanisms.

Slovakia's finance ministry was not immediately available for comment but Bratislava has previously made clear that it would want collateral.

(Additional reporting by George Georgiopoulos in Athens, Martin Santa in Bratislava and Jussi Rosendahl in Helsinki; editing by Mike Peacock)

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