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28 September 2011

WSJ: Finland backs boost to bailout fund


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Finland's parliament approved changes to Europe's temporary bailout fund, clearing a potential hurdle to boost funds available to insolvent eurozone governments even as the country continued to insist on collateral for further aid to Greece.


The 200-seat parliament voted 103 in favour and 66 against the legislation, with 31 lawmakers absent or abstaining.

The law grants new powers to the European Financial Stability Facility, agreed on by eurozone leaders at a July 21 summit in a bid to stem the escalating sovereign-debt crisis. These include increasing the effective size of the EFSF to €440 billion from a previous €250 billion, and the ability to provide funds to recapitalise banks, buy bonds in the secondary market and make credit lines available to Member States that don't have bailout programmes. Under the amended plan, Finland's guarantees to the rescue fund will rise to €13.97 billion from €7.9 billion previously.

Finland's demands have thrown the €109 billion bailout into question, prompting similar demands by other eurozone members. The dispute erupted when Athens and Helsinki struck a deal last month to provide Finland with cash collateral. Several eurozone governments objected to the arrangement, which they said put them at a disadvantage. The International Monetary Fund also opposed the deal.

Negotiations to resolve the dispute are continuing and have focused in recent weeks on a plan to provide noncash, Greek government assets to countries willing to pay for it. Officials are still trying to ensure that "negative pledge" clauses in some Greek bond contracts—which prevent any creditors from getting favourable treatment—wouldn't be triggered by Greece's handing over collateral to some eurozone governments.

Full article



© Wall Street Journal


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