Collaterals deal 'good': Finnish finance minister

(HELSINKI) - Finnish Finance Minister Jutta Urpilainen hailed a deal struck in Luxembourg over collateral before paying out its share of new bailout loans to Greece as a victory for Finnish taxpayers, media reported Tuesday.

"Finland is getting good collateral, and with this the taxpayers' risk is limited," Urpilainen told reporters in Luxembourg, according to Finnish news agency STT.

"That's been the idea behind the demand all along," she added, noting that the deal secures 880 million euros' worth ($1.2 billion) of collateral from Greece.

Urpilainen has been the driving force behind Finland's insistence that it would no longer guarantee bailout loans, including a second rescue package to Greece, without some form of collateral.

During general elections in April, and amid rising Finnish animosity toward bailing out countries who mismanaged their own finances, Urpilainen's Social Democratic Party campaigned heavily on the collateral clause, and demanded it be written into the government agenda before agreeing to take part in Prime Minister Jyrki Katainen's coalition.

But while the deal, reached late Monday night at a meeting of eurozone leaders, hands Urpilainen a political victory, the conditions attached to collateral are so stringent that no other eurozone country is likely to touch them.

"There is a price to be paid," Klaus Regling, the head of the European Financial Stability Facility (EFSF), said at a press conference.

First, Finland will have to pay its share of the EFSF's post-2013 successor, the European Stability Mechanism, in one lump sum instead of over five years.

Any country seeking collateral will have its share of the profit from the EFSF reduced, and even then, the guaranteed returns on the loans written into the advance agreements will be set at no more than 30 percent.

Finally, if the recipient country defaults, the collateral will only be paid out at a time when the EFSF loans mature in 20-30 years.

But Urpilainen insisted the conditions had a silver lining, especially the fact that the collateral will be frozen in AAA-rated bonds until they mature.

"If everything goes wrong, that is, Greece does not pay back its debt, then we get the collateral of 880 million euros. In 30 years that sum could increase to two billion euros," she said, according to public broadcaster YLE.