Clashing opinions on Greek reform

TALLINN - Minister of Finance Jurgen Ligi estimates that Finland’s loan guarantee agreement with Greece could become an obstacle for reforming the Greek nation and, hence, he would not recommend to the Estonian government to demand a similar design in its assistance plan, reports Postimees Online.

“Finland is forcing other countries, including Estonia, to face a very difficult choice: either to join in with requesting this strange exception, or to take into account the fact that Greece’s payment capacity will be decided by its economy and by the execution of the reform plan, and separate transactions are serving merely as obstacles,” said the Estonian minister.
Ligi explained that the agreement between Finland and Greece, according to which Greece will deposit to Finland’s benefit an amount that corresponds to Finland’s guarantee in the European Stability Facility means, in his opinion, that the condition of the guarantee would mean that Greece’s payment capacity would decrease and, hence, this country would need to take more loans.

This side deal means that Greece deposits into escrow millions of euros (which come from eurozone loans) as insurance against Finland’s portion of loans, reports Financial Times.

“If the loan funds of one country are attempted to be guaranteed with other countries’ funds, it would mean that moral, financial and political controversies are unavoidable. The member states, the euro area group, the IMF as well as the private sector have their say in this agreement and I do not see how an approval could be gained,” said the Estonian minister of finance. He did not rule out an international compromise regarding the guarantees, however.