* FinMin says if all get collateral, rescue deal will falter
* High exposure to bank bailout would means no collateral on Greek aid
* Austrians, Dutch, Slovaks sought collateral on Thursday
VIENNA, Aug 19 (Reuters) - Austria proposed on Friday linking demands from euro zone states for collateral on loans to Greece to how much protection each country’s financial sector will secure in a parallel private sector bailout for Athens.
Finance Minister Maria Fekter said she hoped the proposal, sent to other euro zone members, would defuse tensions over a go-it-alone attempt by Finland to secure cash backing on loans it makes to Greece.
On Thursday, Austria, the Netherlands and Slovakia said they also wanted collateral on their loans, which an official in Athens warned would undermine the second bailout deal agreed for Greece last month.
Under Fekter’s plan, Austria, whose banks and insurers have low exposure to Greece, would get collateral on its sovereign loans while heavily exposed countries like Germany and France would not.
“What Finland negotiated means that all of us have to pay more so that Finland gets collateral,” Fekter told reporters late on Thursday in remarks released for publication on Friday, reiterating this was “unacceptable” to Austria, which wants equal treatment.
“I know that if everyone demands collateral then (the rescue package for Greece) cannot be financed. That is why I proposed... that we combine the private sector involvement — the protection of the private sector — with the protection via collateral,” Fekter said.
Greece’s private sector creditors last month agreed to take a 21 percent loss on their bond holdings as part of a 37 billion euro ($52.12 billion) contribution to Greece’s rescue.
Banks and insurers that participate will be able to swap Greek debt for safe bonds backed by the European Financial Stability Facility bailout fund. The deal limits their potential losses, a relief for exposed countries like France and Germany.
Fekter said the plan would limit the number of countries seeking collateral and make the rescue package viable.
“I hope that other countries accept this Austrian proposal.”
Asked what it meant for Austria, she said: “We have a low share of private sector (involvement), which means we would get collateral under this model.”
Fekter, who said she spoke to Finnish counterpart Jutta Urpilainen on Wednesday, said Finland struck a deal with Greece to get as collateral 20 percent of its loan value in cash.
This meant in effect other euro zone countries were financing collateral for Finland, she said.
A senior Greek government official said on Thursday Athens was not talking about collateral with countries other than Finland.
(Reporting by Michael Shields)
$1=.7099 Euro Editing by John Stonestreet