Brussels, 25/08/2011 (Agence Europe) - The European Commission hopes that all the practical details of the second Greek bailout (to the tune of €100bn) will be decided over the next week, particularly the matter of financial guarantees that might be demanded of Greece for the loans it will be given. On Thursday 25 August, a spokesperson for EU Economic and Monetary Affairs Commissioner Olli Rehn said clarification of the details was expected towards the end of the month (following the agreement reached at the eurozone summit of 21 July), but gave no exact date.
Last week, Athens pledged to deposit some €500 million in a special bank account as insurance against the risk of defaulting on paying back the part of the second bailout to be provided by Finland. This agreement between Greece and Finland has been sharply criticised by a number of countries (Austria, the Netherlands, Slovenia and Slovakia), which are demanding special bank accounts to guarantee their own share of the bailout. Negotiators are discussing less liquid guarantees at the moment (real estate rather than cash, for example), according to the Wall Street Journal, but there is a bitter taste in the mouth of some of the negotiators. According to the July eurozone deal, the proceeds of the privatisation programme required of Greece under the terms of the second bailout should be used to reduce the country's debt, explained a European diplomat to this newsletter, but if some of the income simply sits in bank accounts as guarantees for the loans, then that will do nothing to reduce the size of the Greek debt, and any such measures that would unravel the July deal should be strictly avoided. If the guarantees are in another form, they might possibly be acceptable, but for that it is for Finland to come up with suggestions compatible with the second bailout agreement.
The Finnish government has been demanding guarantees for a long time, but is taking a flexible approach with the aim of finding a solution that will suit its EU partners. Finnish Prime Minister Jyrki Katainen is reported by the Helsingin Sanomat as saying that the government is testing out various solutions to keep all parties on board.
On Thursday, the interest rates demanded for a hypothetical roll-over of the Greek debt reached a new record high (18.5%). The European Central Bank is continuing to buy up Italian and Spanish sovereign debt. On Wednesday, President of Germany Christian Wulff said that the ECB's purchase of bonds could be challenged in court because the bank is overshooting its powers and allowing the financial markets to earn huge commission without running any risk. (M.B./transl.fl)