Eurozone governments are discussing a plan to have non-cash Greek government assets, including real estate, offered as collateral for a new round of rescue lending to Greece, backing away from a bilateral agreement reached last week between Greece and Finland, officials said Tuesday.
The discussions come as opposition is mounting among the governments to the Finnish-Greek deal—which would see Greece pay Finland hundreds of millions of euros in cash as collateral against the loans. Crucially, German Chancellor Angela Merkel has rejected the deal, said a German lawmaker. Other governments are now seeking similar deals, saying the arrangement could undermine Greece's ability to repay them. The International Monetary Fund also opposes the agreement, because it could threaten the IMF's customary "preferred creditor" status that ensures the fund is always first to be repaid, officials say.
Moody's Investors Service Monday also criticised the bilateral agreement as "credit negative" for all bail-out countries, which include Ireland and Portugal as well as Greece. "The pursuit of such agreements could delay the next tranche of financial support for Greece and so precipitate a payment default", Moody's Senior Vice President, Kristin Lindow, noted.
In its statement, Moody's said that while Finland is supposed to contribute just about 2 per cent of Greece's total bailout package, other countries are giving a larger share. "A proliferation of collateral agreements would limit the availability of funds for future programmes, as well as the value of the package that the bail-out recipients actually receive", said Moody's. "Therefore, the agreement between Greece and Finland, which is small by itself, assumes much greater significance."
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