Finland’s finance minister said yesterday she did not expect the eurozone to resolve a dispute over her country’s demand for collateral for loans to Greece — adding to concerns over the currency union’s ability to stamp out its crippling debt crisis.
US Treasury Secretary Timothy Geithner joined the meeting yesterday in Wroclaw, Poland — the first time that a US finance chief has attended such a gathering — in a sign of how the US is getting increasingly concerned over the global impact of the eurozone debt crisis.
However, hopes for some tangible progress were quickly thwarted, when Finnish Finance Minister Jutta Urpilainen said there was still no solution to her country’s demand for guarantees to back its contribution to a second, 109 billion euro (US$151 billion) rescue package for Greece.
The small Nordic country’s demand has triggered similar requests from several other states, including Austria and the Netherlands.
If the requests were fulfilled, providing the collateral could shave off hundreds of millions of euros from the overall bailout sum.
“Unfortunately I don’t see that we can find a solution tonight,” Urpilainen said as she arrived for a meeting with her eurozone counterparts in Wroclaw.
The dispute has unsettled markets, as it is another sign of divisions between the 17 countries that use the euro over whether they can actually save Greece, which has been relying on emergency loans from other eurozone countries and the IMF for more than a year.
The rescue faces several other challenges. Greece’s international debt inspectors interrupted their most recent review mission two weeks ago after they discovered that Athens was set to miss its budget targets. Since then, Greece has announced a special property tax, which the government says should cover the revenue shortfall.
Meeting strict budget, privatization and reform targets set out in Greece’s deal for a first 110 billion euro rescue package is a prerequisite for receiving the next aid installment, which is due by the end of the month.
Without the 8 billion euro tranche, Greece would run out of money by the middle of next month and potentially default on its debts.
However, Austrian Finance Minister Maria Fekter, traditionally a hard-liner when it comes to sticking to the bailout conditions, said she was “very optimistic that the next tranche can be paid out to Greece.”
She warned against a Greek default, which she said would be “very costly.”
However, she did not rule it out as a possibility in the future.
“Should a situation arise, where this way [of providing rescue loans] suddenly becomes more expensive than the alternative, we will have to think about the alternative,” Fekter said. “But at the moment this is not yet the case.”
Referring to the debate about collateral, Fekter said she had proposed a model where guarantees would be available for everyone that wants them.
Meanwhile, Greek Finance Minister Evangelos Venizelos defended his country’s efforts and called on the other eurozone states to clear up the remaining issues that have delayed the new bailout and quickly implement changes to the region’s bailout fund that were also agreed at the July summit.
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