Abuse of official secrecy. It’s been one of the more corrosive but — by definition — shadier aspects of the eurozone crisis.
It can take the form of a report on money-laundering in Cyprus. Or the opaque process by which Troika debt sustainability analyses are drawn up. Emergency liquidity assistance to banks, even. Read more
… and we are prepared for all scenarios,” said Finnish finance minister Jutta Urpilainen earlier in the month.
‘ALL SCENARIOS’, you say? Read more
Spain’s banks really are providing Finland’s collateral for the EFSF/ESM bailout of Spain’s (weaker) banks.
The Finnish finance minister announced a deal on Tuesday. Here’s the presentation (in Finnish, hat-tip Aleksi Moisio) Read more
At an ungodly hour of Tuesday morning, eurozone ministers agreed that the EFSF will lend Spain €30bn for its banks by the end of July.
Two weeks. Read more
There’s nothing FT Alphaville likes doing more on a New York morning than rooting around the ESM Treaty.
So when you see headlines like this (via Reuters) Read more
‘Greece Pays Finland Collateral Money,’ goes the Bloomberg headline.
Well, that’s broadly true we suppose. Technically, Greek banks which cannot be named have transferred €311m of Greek government bonds which then moved into the custody of an international investment bank which cannot be named which (at some point) will sell them, put the revenues in safe assets, and release the collateral to the Finnish government if Greece does things which cannot be named to its EFSF bailout loans of which Finland provides a portion. (Finland pays a fee as part of its end of an exchange of cash-flows.) Read more
Updates – Oops. The original version of this presentation seems to date from October last year, although the details remain current. In any case, if it does date to October, we should make that clear. Apologies! Even so, it’s critical to understanding the Finnish collateral agreement. And it’s not like we have much else to go on.
This blog post by Osmi Soininvaara, a Finnish Green MP who has read the agreement, is also worth a read (H/T JussiR in comments). Soininvaara defends the reason for secrecy (to protect the other counterparties to the deal). But he argues that you don’t need to know the secret bits to know it’s a poor deal. He does have a point if there are legitimate business reasons to encrypt some parts of the deal, but we would still argue it’s important to know how credit events are defined, and how exactly the reference assets in this swap work. Read more
A reader passes on this curious detail from a Finnish MPs’ debate on Greece (via Helsingin Sanomat):
Some MPs expressed shock that the Ministry of Finance decided to keep the collateral agreement reached between Finland and Greece a secret. Read more
Icap’s weekly European repo report shines some light on recent eurozone bond developments.
For example, it blames illiquidity in German bond markets for causing chaos in the asset class rather than a sudden change in mindset. The illiquidity, it says, is specifically related to the perceived virtue of the asset (everyone wants to buy the bonds outright) rather than a sudden rush for the exit. Read more
Europe’s leaders have apparently accepted that Greece will default, although they can’t agree by how much it should write down its debt.
Perhaps someone might try asking Finland? Read more
Newsflash — Finland to take part in Greek bond swap! Sort of. Via Bloomberg:
Under the accord, Greek bonds will be transferred from Greek banks to a trustee, which will sell them [no actual swap then, but think about the problem here - ed.] and invest the proceeds in AAA rated bonds with maturities of 15 to 30 years. Read more
Slovakian and Finnish leaders attempted to damp down domestic rancour over eurozone bail-out contributions. Slovakia’s finance minister, Ivan Miklos, said he will oppose delaying a crucial vote on new powers for the European Financial Stability Fund, the FT reports, after the country’s parliamentary speaker, Richard Sulik, said that a vote on the measures would not be held until December. Mr Sulik’s assertion, made in an interview with the WSJ, defies calls by the European Commission for all 17 countries in the single currency area to approve the measures by the end of the month. Meanwhile Finland’s prime minister said the country will forge a deal on collateral for Greek bail-out contributions that will satisfy the IMF, Bloomberg reports. The deadlock over AAA rated Finland’s insistence it get collateral for new Greek loans threatens to delay rescue measures in the euro region, where efforts to contain the debt crisis are unraveling on multiple fronts.
You might have heard of the latest Finnish proposal to collateralise loans to Greece. This would transfer Greek privatisation assets to a Luxembourg-based société anonyme to be held as security against default, according to Reuters, which also has the proposal text.
Here’s a nice diagram of it all works: Read more
Hat-tip to a reader for pointing us to this Reuters story, on a fresh twist in the Greco-Finnish collateral fiasco:
While Finland had wanted to receive cash as collateral — which would have required Greece to deposit about 500 million euros in an escrow account to guarantee Finland’s 1.4 billion euros of loans to Athens — that requirement has been dropped. Read more
Eurozone finance ministry officials will try to rescue their €109bn Greek bail-out deal by overhauling a controversial Finnish collateral agreement with Athens to open it up to other European creditor countries, the FT reports. European officials warned the new version, to be discussed on Friday by the so-called “euro working group” of finance ministry technocrats, faced objections from some member states and potentially other institutions, such as the European Central Bank and the International Monetary Fund. But three officials briefed on the talks said the group was looking at a proposal for a “non-cash” collateral arrangement where Greece would put up either real estate or shares in state-owned enterprises and financial institutions as a guarantee towards eurozone bail-out loans. The new collateral would then be provided to all eurozone members, or at least those who wished to participate in the scheme. “This is where I’m putting my hopes,” said a senior eurozone government official. For the latest on the negative pledge clause, see FT Alphaville. Read more
The latest in Finland’s mooted deal to get cash collateral from its part of the Greek bailout — well, maybe, Finland will change the deal after all. That’s after other lenders moaned about special treatment.
(A certain Darth Vader quote comes to mind…) Read more
Following Finland’s cash collateral deal with Greece — an issuer comment from Moody’s on Monday:
If generalized, these bilateral agreements would be credit negative for Greece and other countries now receiving or potentially in line for bailouts, since it illustrates continued differences among euro area states over the provision of support to their fellow members. The pursuit of such agreements could delay the next tranche of financial support for Greece and so precipitate a payment default. Read more
The latest — maybe they’ll all just pretend this never happened?
The head of the Finnish bank OP-Pohjola said on Friday that Greece might not pledge cash collateral to any country involved in its second bailout after all, despite (er) telling Finland it would, leading other states to want some collateral too. So Finland might simply withdraw from the bailout, Reijo Karhinen thinks. We doubt that’s possible. But it wasn’t supposed to be possible for states to fillet the agreed bailout terms to get their own sweeteners post facto, either. The European Commission had the supremely lame response on Friday of assuring that the eurozone was “examining” the Greek-Finnish deal. After the fact though! Read more
From an offering circular for Greece’s May 2012 floating rate note:
Some graphics from Danske Bank to ponder ahead of the ECB’s Thursday meeting:
We saw some ‘political risk’ last weekend — when Finnish voters elected a number of politicians from the euro-skeptic True Finns party into office. It is feared that any resulting political coalition with the True Finns included could threaten to throw the eurozone’s bailout plans out of whack.
So don’t expect political risk to go away. Read more
A populist anti-euro party made big gains in the Finnish general election on Sunday, highlighting growing resistance across northern Europe to taxpayer-funded bail-outs for Portugal and other crisis-hit eurozone countries, reports the FT. The True Finns party, which has vowed to oppose the proposed rescue package for Portugal, won about 19 per cent of the vote, up from just 4.1 per cent at the last election in 2007. Read more
Want to know the shape of things to come in Ireland? Spain?
Look no further than … Finland. Read more
Nordic countries on Tuesday gave the go-ahead for up to €444m more aid for Iceland’s stricken economy even as northern Europe counted the mounting cost of travel disruption caused by the eruption of an Icelandic volcano, reports the FT. The Nordic region has been among the hardest hit by ash fallout from the Eyjafjallajökull volcano yet Sweden, Denmark, Norway and Finland appeared to be in a forgiving mood as they agreed to end a long delay in funding for Iceland’s economic recovery programme. Read more
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