High price to be paid by Finland for collateral for Greek loan guarantees

[Jezter]

Prime Minister praises arrangement


The agreement for collateral provided in return for Finland’s participation in the financial bailout of Greece is expected to considerably increase Finnish public debt.
Under a plan announced on Tuesday by the Ministry of Finance, Finland will guarantee EUR 2.22 billion worth of loans granted to Greece between 2011 and 2014.
As Greece takes out the loan, the money will be marked down as Finnish public debt, according to European statistical practice.
This public debt is referred to as EMU debt. Under the European Growth and Stability Pact, countries that use the common European currency, the euro, must not allow the debt to exceed 60 per cent of GDP.

According to Statistics Finland, this country’s EMU debt stood at EUR 84.8 billion in late June.

The Ministry of Finance predicted last year that Finland’s EMU debt this year would amount to 51 per cent of GDP.

The Greek loans are granted through the European Financial Stability Facility (EFSF).

So far, the bilateral credits extended by Finland to Greece have directly increased Finland’s state debt because Finland’s state finances have been in deficit since 2009.
If the upcoming sixth instalment of emergency funding for Greece is included in the calculations, Finland will soon have lent Greece more than EUR 6 billion.

The financing granted to Greece is at a much higher level than the Finnish commitments to two other overextended eurozone countries – Ireland and Portugal.
Finland has agreed to guarantee EUR 333 million in EFSF loans to Ireland and EUR 600 million in loans to Portugal.

Finland is to receive collateral for the loan guarantees to Greece, that is worth EUR 880 million at the initial stage. This is expected to increase to EUR 2.2 billion over the next 30 years. The collateral is part of a complicated exchange agreement of Greek state bonds, involving the participation of Greek commercial banks. Greek banks are to grant bonds to an investment bank, and the sale of those bonds is supposed to yield EUR 880 million in capital.
This money would be invested in the bonds of other states with the best possible credit rating.

A condition of the collateral is that Finland must pay its EUR 1.44 billion share into the permanent European Stability Mechanism in a single payment next year.
If the ESM generates a profit, Finland would be entitled to a relatively larger share of the dividend than the other eurozone countries.

Because of the one-off payment, Finland’s share of the initial capital of the European Stability Mechanism will be temporarily larger than that of the other eurozone countries, which are to make five separate payments between 2013 and 2017.
Finland has also agreed to a 40 per cent reduction in its possible profits from the ESM; the profits would be invested in the Greek commercial banks that take part in the collateral arrangements.

Finnish Prime Minister Jyrki Katainen (Nat. Coalition Party) praised the arrangement as beneficial for Finland.

“The solution meets all of the Finnish and European criteria, it is open to all, and is acceptable to all. On the one hand, the model gives us insurance against a possible risk of losses that are included in these loan guarantee decisions.”
Katainen also sees no problem in a one-off capital payment to the European Stability Mechanism, which is something that he proposed already when he was Minister of Finance.

Prime Minister Katainen observed that Finland is one of the least indebted countries with a triple-A credit rating.

“We can borrow money from the market and invest it without a significant increase in the debt burden. Not all countries can necessarily do the same.”
While the one-off payment will add to Finnish interest payments, Katainen expects that this will be cancelled out by dividends from the ESM.

[Acid Trip]

Good luck getting your money back!

[Jezter]

Good luck getting your money back!
Thanks! We are going to need it!

I just don't understand what fuck for we fought so hard for these gurantees that only end up costing more for us..no wonder other Euro countries are a bit amused...

[Muddy]

Fuck dude... What the shit did you guys take on that for?

[Jezter]

Fuck dude... What the shit did you guys take on that for?
To save the EU?

[Acid Trip]

To save the EU?

But is the EU worth saving? What tangible benefits has Finland gotten by being a part of the EU?

[Muddy]

To save the EU?


There is no hope for Greece..

[Teh One Who Knocks]

There is no hope for Greece..

I've got $50 in cash on the counter, I wonder if I should just buy Greece with it :-k

[Acid Trip]

I've got $50 in cash on the counter, I wonder if I should just buy Greece with it :-k

You could, but what would you do with the other $40?

[FBD]

But is the EU worth saving? What tangible benefits has Finland gotten by being a part of the EU?

aside from a bloated and empty sense of unity? :dance:


oh, and massive debt from the freeloaders :lol:

[Teh One Who Knocks]

You could, but what would you do with the other $40?

Beer :cheers:

[Muddy]

Yes!

[Deepsepia]

But is the EU worth saving? What tangible benefits has Finland gotten by being a part of the EU?

A lot of benefits, as do the other northern European countries.

Being a AAA credit with your own currency isn't a good thing if you're an export economy, as are Finland and Germany.

Were Finns still exporting with costs denominated in Markaa, or Germans exporting in D-Marks, they'd have huge competitiveness problems (see Switzerland).

The Euro makes more sense for the Germans and the Finns than for the Greeks.

The Greeks should do what over-indebted countries have always done -- default and devalue. This works well for a country whose terms of trade "just don't work", you can see the examples of many nations, like Argentina and Russia, that followed this path successfully. But being in the Euro, Greece can't do that.

In short, the Euro is much worse for the Greeks than it is for the Finns.

[Arkady Renko]

A lot of benefits, as do the other northern European countries.

Being a AAA credit with your own currency isn't a good thing if you're an export economy, as are Finland and Germany.

Were Finns still exporting with costs denominated in Markaa, or Germans exporting in D-Marks, they'd have huge competitiveness problems (see Switzerland).

The Euro makes more sense for the Germans and the Finns than for the Greeks.

The Greeks should do what over-indebted countries have always done -- default and devalue. This works well for a country whose terms of trade "just don't work", you can see the examples of many nations, like Argentina and Russia, that followed this path successfully. But being in the Euro, Greece can't do that.

In short, the Euro is much worse for the Greeks than it is for the Finns.

to this day, I haven't figured out why Greece was so keen to join the common currency in the first place. Did they calculate with the possibility of a future bankruptcy and bailout from the get-go?

[Deepsepia]

to this day, I haven't figured out why Greece was so keen to join the common currency in the first place. Did they calculate with the possibility of a future bankruptcy and bailout from the get-go?

The benefits were front loaded, the costs all on the back end.

The "deal" in joining the Euro is essentially having the wealthy countries of the North "open a tab" for you, plus all kinds of other benefits (like free movement of workers, though Schengen is a somewhat different thing, its all still part of the idea "you're European" as opposed to "you're Greek"). The benefits of being in Europe for Greeks: a lot more folks driving Mercedes than could afford them

The hard question is now for the Germans, not really for the Greeks. The Greeks can't pay, that much is clear. So what do their creditors want?

You can't liquidate a country.

It seems to me that Germany is missing an opportunity to, at very small cost, be the dominant player in Europe. It may be that Germans just don't want that role, but you look at the national accounts and its plain: Europe either has a German driver, or it has no driver at all . . .

[Jezter]

But is the EU worth saving? What tangible benefits has Finland gotten by being a part of the EU?
I think it is. I think the core ideas and values of EU are good. How well they have been applied and become part of the EU and participating countries, that is another story... What tangible benefits Finland has gotten? That is actually something I don't know how to answer. :)

There is no hope for Greece..
It seems like so, but hey, lets not forget the "Doomsday Clock" you guys were watching (and still are?) as your country teetered (teeters?) on the edge of default... If there is will, there is a way. These Greeks just have to do something about it and realize they've fucked up BIG BIG time. Take some shit and beating and get back on their feet again. Actually start doing this funny thing called work.

aside from a bloated and empty sense of unity? :dance:


oh, and massive debt from the freeloaders :lol:
To be honest, this is very accurate and common feeling here in Finland. To us, the feeling of unity is not so strong and it is very fake for us. We've never really felt so much to be a part of something bigger...we've just done our own thing up here and been the "straight As student" of the EU nevertheless. We hate the freeloaders and that is what the moans about EU are mostly about. About countries that want to join and expect to get it all on a golden platter, paid by us. And some of the very stupid laws that came with EU...but it has brought a lot of good too, like Deepsepia here says.

[Muddy]

It seems like so, but hey, lets not forget the "Doomsday Clock" you guys were watching (and still are?) as your country teetered (teeters?) on the edge of default...


Never heard of it.. ?

[Arkady Renko]

The benefits were front loaded, the costs all on the back end.

The "deal" in joining the Euro is essentially having the wealthy countries of the North "open a tab" for you, plus all kinds of other benefits (like free movement of workers, though Schengen is a somewhat different thing, its all still part of the idea "you're European" as opposed to "you're Greek"). The benefits of being in Europe for Greeks: a lot more folks driving Mercedes than could afford them

The hard question is now for the Germans, not really for the Greeks. The Greeks can't pay, that much is clear. So what do their creditors want?

You can't liquidate a country.

It seems to me that Germany is missing an opportunity to, at very small cost, be the dominant player in Europe. It may be that Germans just don't want that role, but you look at the national accounts and its plain: Europe either has a German driver, or it has no driver at all . . .

the mercedes mtaphor is pretty acurate for greee's situation in general, I think. They have way more public employees than they could really afford, these employees get much better pensions and benefits than the state could reasonaby afford, their IRS is much more lenient than it should be (45 billion euros worth of due taxes aren't being collected for unfathomable reasons, let's not even try to imagine how much money is lost through tax evasion...), all in all the government there is incredibly inept and dysfunctional but still they want to play with the rich kids...

As for Germany taking the lead, that would not go down well with many other EU countries e.g. France and Poland, at least as long as it was apparent. And besides, everyone has grown pretty used to the situation where whenever there's a disagreement in the EU, it's settled by members being basically paid off with some EU subsidy or "cohesion funds" or whatever, which ends up being paid by germany with some help from the other net contributors.

Besides, the problem with our government is that Frau Merkel has no other ambition than to keep her job. She doesn't want to take decisions, leave alone unpopular ones. The worst possible mindset for her job right now.

[Muddy]

Man Rokr, I heard on NPR this morning that the friggin Greeks hate you guys in Germany.... And they run Hitler commercials and stuff on TV when referring to you guys... wtf?

[Jezter]

Never heard of it.. ?

You must've lived in total media black-out then. Or have you forgotten the countdown to default when it was about raising the debt ceiling etc?

[DemonGeminiX]

You must've lived in total media black-out then. Or have you forgotten the countdown to default when it was about raising the debt ceiling etc?

No, I don't recall that either. There was just a big stink that nobody really gave a shit about the politicians waiting until the last minute to get something passed, but there was no 'doomsday clock' mentioned.

The only Doomsday Clock I know of regards the proliferation of nuclear weapons. That's been around since 1947. From what I understand, it's meaning has changed to regard global disaster, not just nuclear war, but I'm not sure when that change came about. According to wikipedia it was 2007, but I don't remember anything regarding it in the news.

It currently sits at 6 minutes to midnight.

[Jezter]

I've read and heard it used several times during the debt ceiling shit.

[Muddy]

:lol: What the frick are they filling your heads with over there, Homie?

[Acid Trip]

I've read and heard it used several times during the debt ceiling shit.

You aren't crazy Jezter. Several websites had a countdown to the day the US would "default".

I'm sure other countries had doomsday clocks because if the US defaults the worldwide implications would have been enormous.

[Jezter]

:lol: What the frick are they filling your heads with over there, Homie?

The exact same shit as over there?
Y'all were talking about Armageddon and Doomsday etc...

[Muddy]

The exact same shit as over there?
Y'all were talking about Armageddon and Doomsday etc...


No we weren't... :lol:

[Jezter]

No we weren't... :lol:

No? :-k

http://www.msnbc.msn.com/id/43791431/ns/politics-capitol_hill/t/end-world-debt-stalemate-invokes-language-armageddon/

[Acid Trip]

No? :-k

http://www.msnbc.msn.com/id/43791431/ns/politics-capitol_hill/t/end-world-debt-stalemate-invokes-language-armageddon/

:burn:

[Muddy]

No? :-k

http://www.msnbc.msn.com/id/43791431/ns/politics-capitol_hill/t/end-world-debt-stalemate-invokes-language-armageddon/


Im sorry I missed that random article by MSNBC, Bud.. :)

No one in the real world outside of the tinkerweb was talking "Armageddon".


:burn:

:slap:

Get for real.. :lol:

[Jezter]

Im sorry I missed that random article by MSNBC, Bud.. :)

No one in the real world outside of the tinkerweb was talking "Armageddon".



:slap:

Get for real.. :lol:

Did you fail at reading, bud?

"So, the White House has upped the ante, eschewing catastrophe for a word more reminiscent of the "Cold War" stand-off between a nuclear-armed Soviet Union and United States —Armageddon.

Obama used the biblical reference last week at a White House news conference when he talked about a complicated Republican plan that seeks to pin the blame for raising the debt ceiling on him. He said then it could avert economic Armageddon."

That is where the tinkerwebs got the reference and started using it, just like the news groups too.

[Hal-9000]

So they've taken the old cold war nuclear term 'Doomsday Clock' and now apply it to a country's economic status? Did not know that..

[Muddy]

Did you fail at reading, bud?



Dont be a smart ass Jester. It doesn't suit you..




"So, the White House has upped the ante, eschewing catastrophe for a word more reminiscent of the "Cold War" stand-off between a nuclear-armed Soviet Union and United States —Armageddon.

Obama used the biblical reference last week at a White House news conference when he talked about a complicated Republican plan that seeks to pin the blame for raising the debt ceiling on him. He said then it could avert economic Armageddon."

That is where the tinkerwebs got the reference and started using it, just like the news groups too.

Since when has political rhetoric meant the American people were thinking armegeddon was around the corner?

[Jezter]

Dont be a smart ass Jester. It doesn't suit you..



Since when has political rhetoric meant the American people were thinking armegeddon was around the corner?

I don't think it was about what the people were thinking...it was about what kind of language was used to describe and scaremonger. Seesh...

[Acid Trip]

So they've taken the old cold war nuclear term 'Doomsday Clock' and now apply it to a country's economic status? Did not know that..

An Economic meltdown in one major country/region causes a domino effect the likes of which we've never seen. The housing meltdown wasn't a total meltdown and you can see the problems it caused worldwide.

Google: Economics Mutually Assured Destruction

It's the same thing as Nuclear Mutually Assured Destruction but with economies instead of bombs/missiles.

[Muddy]

I don't think it was about what the people were thinking...it was about what kind of language was used to describe and scaremonger. Seesh...



It seems like so, but hey, lets not forget the "Doomsday Clock" you guys were watching (and still are?)


Im telling you that the people arent thinking that... maybe the news is trying to convince people of that (through an article or two I missed)... But the general feel on the street isn't Armageddon..

[Deepsepia]

the mercedes mtaphor is pretty acurate for greee's situation in general, I think. They have way more public employees than they could really afford, these employees get much better pensions and benefits than the state could reasonaby afford, their IRS is much more lenient than it should be (45 billion euros worth of due taxes aren't being collected for unfathomable reasons, let's not even try to imagine how much money is lost through tax evasion...), all in all the government there is incredibly inept and dysfunctional but still they want to play with the rich kids...

As for Germany taking the lead, that would not go down well with many other EU countries e.g. France and Poland, at least as long as it was apparent. And besides, everyone has grown pretty used to the situation where whenever there's a disagreement in the EU, it's settled by members being basically paid off with some EU subsidy or "cohesion funds" or whatever, which ends up being paid by germany with some help from the other net contributors.

Besides, the problem with our government is that Frau Merkel has no other ambition than to keep her job. She doesn't want to take decisions, leave alone unpopular ones. The worst possible mindset for her job right now.

It's a nice irony, that no-longer aggressive Germany may now be too reticent.

The way I look at it, Germany integrated the East, which was a disaster.

So the German business and financial establishment actually has recent, practical experience in rationalizing countries in a disastrous state. That's the skill set that's needed right now.

I'm sure it's not the solution that appeals to either Greeks or Germans -- not to mention Poles or Russians; that it's so politically unappealing doesn't change the logic.

At the end of the day, Germany did a very good job in the East, and that was just about as dire as Greece is today. What Europe is missing is confidence, and I've got confidence that Germans can fix busted countries.

[Arkady Renko]

Man Rokr, I heard on NPR this morning that the friggin Greeks hate you guys in Germany.... And they run Hitler commercials and stuff on TV when referring to you guys... wtf?

people down there are still in denial, mostly. Granted, it's kinda hard to face the fact that your country is a complete failure in pretty much every aspect...anyway, the popular outlook seems to be that Greece actually is a hidden superpower and Germany want to colonialize them again, ut this time with the help of a ficticious debt crisis instead of tanks and paratroopers. Why does germany want to do that? cause that's just how they roll...


It's a nice irony, that no-longer aggressive Germany may now be too reticent.

The way I look at it, Germany integrated the East, which was a disaster.

So the German business and financial establishment actually has recent, practical experience in rationalizing countries in a disastrous state. That's the skill set that's needed right now.

I'm sure it's not the solution that appeals to either Greeks or Germans -- not to mention Poles or Russians; that it's so politically unappealing doesn't change the logic.

At the end of the day, Germany did a very good job in the East, and that was just about as dire as Greece is today. What Europe is missing is confidence, and I've got confidence that Germans can fix busted countries.

We funneled about 2 trillion euros into eastern germany so far with mixed results. Take into account the fact that greece has half the population and is probably 50% less fucked up, that would still mean a 500 billion euro pricetag on saving the place. *shudders*

[Acid Trip]

It's a nice irony, that no-longer aggressive Germany may now be too reticent.

The way I look at it, Germany integrated the East, which was a disaster.

So the German business and financial establishment actually has recent, practical experience in rationalizing countries in a disastrous state. That's the skill set that's needed right now.

I'm sure it's not the solution that appeals to either Greeks or Germans -- not to mention Poles or Russians; that it's so politically unappealing doesn't change the logic.

At the end of the day, Germany did a very good job in the East, and that was just about as dire as Greece is today. What Europe is missing is confidence, and I've got confidence that Germans can fix busted countries.

Quote of the day (bold text). Now how do you pass on that knowledge to Greece?

[Deepsepia]

Quote of the day (bold text). Now how do you pass on that knowledge to Greece?

Well, in theory that's what "Europe" is supposed to be about. But at a practical level, can German bankers and leaders show up in Athens and say "look, this is how it's going to work?"

Doesn't sound too likely, does it? Still, it's what should happen, bearing in mind that should and will are different things.


An Economic meltdown in one major country/region causes a domino effect the likes of which we've never seen. The housing meltdown wasn't a total meltdown and you can see the problems it caused worldwide.

Google: Economics Mutually Assured Destruction

It's the same thing as Nuclear Mutually Assured Destruction but with economies instead of bombs/missiles.

You've put your finger on a big worry, and a big mystery- why are such small inputs putting the system in danger? It shouldn't. When Enron and Worldcom went bust, did the system melt down? No. They just went bust . . . But no alarm bells that the end of the world was upon us.

My two cents is that it's the difference between equity and debt. When the dot com bubble burst, losses were mostly in equity, against which there never is much leverage. But when debt goes bust, that debt is often on the books of oth financial institutions, levered at enormous multiples, and so there's the possibility of putting the institutions holding this debt into a position of insolvency.

That's my guess, anyway. Whatever the case, a well designed system shouldnt be vulnerable to the default of such a minor player as Greece, or such a small part of the financial system as subprime.

[Acid Trip]

That's my guess, anyway. Whatever the case, a well designed system shouldnt be vulnerable to the default of such a minor player as Greece, or such a small part of the financial system as subprime.

I couldn't agree more. It's like the investment banks know something no one else does. Hell I work for a bank and this makes no sense to me.

This just in....Spain and Italy have been downgraded by Fitch. Apparently the ratings agencies are taking NO chances after the housing debacle.

[Deepsepia]

I couldn't agree more. It's like the investment banks know something no one else does. Hell I work for a bank and this makes no sense to me.

This just in....Spain and Italy have been downgraded by Fitch. Apparently the ratings agencies are taking NO chances after the housing debacle.

. . . Yup, there's no barn door they will not shut after the horse is gone.

For the life of me, I can't see why the "news" that Spain and Italy might not pay their debts would surprise anyone, but apparently it does. In a well run system, loans to Spanish builders would be "risky loans" -- you still make them, but not too many, and with adequate reserves. Apparently they were treated as money good, which is why this news is worrisome.

I think your point about the investment banks is a good one. What they sold was complexity. They took things which bankers and investors once understood and could value, and swapped them for things which are anyone's guess. Not every complex derivative is a bad idea, but the accumulation of complexity leaves people sitting on their hands, because that's the prudent thing to do when you can't tell what something's worth.

[JoeyB]

How did a thread started by Jezter turn out to be this fucking serious?

[FBD]

. . . Yup, there's no barn door they will not shut after the horse is gone.

For the life of me, I can't see why the "news" that Spain and Italy might not pay their debts would surprise anyone, but apparently it does. In a well run system, loans to Spanish builders would be "risky loans" -- you still make them, but not too many, and with adequate reserves. Apparently they were treated as money good, which is why this news is worrisome.

I think your point about the investment banks is a good one. What they sold was complexity. They took things which bankers and investors once understood and could value, and swapped them for things which are anyone's guess. Not every complex derivative is a bad idea, but the accumulation of complexity leaves people sitting on their hands, because that's the prudent thing to do when you can't tell what something's worth.

buddy of mine used to race...you wouldnt believe the ways everyone would make modifications...some of which 'broke rules'...but the "rules" only said a specific few about what could and could not be done. anything else wound up being 'fair game'...especially when the rulemakers made a tighter overall restriction.

not saying its right...

...just sayin'

when you have to expend effort to be at the top of your game, naturally you want the most out of your efforts.

doing things like slowing down the racers for no other reason than a few fans down bottom say they're going too fast on the track, and perhaps if one's not careful it crashes. instead of letting physics decide and the prize won by those that know how to turn well.

might just make the overall entertainment experience a little less, might not have quite so many fans interested in your race. might just be a reflection of other aspects of reality. :thumbsup:

[Jezter]

How did a thread started by Jezter turn out to be this fucking serious?

Cuz I rarely start something serious...and so people respect that and keep it serious. I joke and kid around enough in other threads. :D

[Deepsepia]

buddy of mine used to race...you wouldnt believe the ways everyone would make modifications...some of which 'broke rules'...but the "rules" only said a specific few about what could and could not be done. anything else wound up being 'fair game'...especially when the rulemakers made a tighter overall restriction.

not saying its right...

...just sayin'

when you have to expend effort to be at the top of your game, naturally you want the most out of your efforts.

doing things like slowing down the racers for no other reason than a few fans down bottom say they're going too fast on the track, and perhaps if one's not careful it crashes. instead of letting physics decide and the prize won by those that know how to turn well.

might just make the overall entertainment experience a little less, might not have quite so many fans interested in your race. might just be a reflection of other aspects of reality. :thumbsup:

Well, folks like watching racing. But they also have to drive on the highway. What we had was "street racing" where the folks took their Indy cars and Bonneville flats dragsters out into commuter traffic.

There has to be a place for "speculative finance". Its useful in pricing hard to price thing, but there also has to be a place where a mortgage is just a mortgage, and where the inevitable disaster in the speculative market doesn't blow up everything else.

That's sort of the idea of Glass Steagall, which worked well for a generation. But that answer would work for the US, because it's one market. What's the right way for a European nation to think about the financial system and contingent obligations of other European nations?

That ones a puzzler.

[FBD]

Definitely so...and more evidence not to throw all of one's eggs in one basket. especially foul ones that will rot the entire basket! Although like all analogies, the racing one certainly has its shortcomings and cant be extrapolated arbitrarily far.

Its why I advocate just doing the honest, tough thing from the start instead of giving free passes, bailing out time after time...then by the time you actually deal with it, its crisis level.

G-S...that's why legislation/regulation should be carefully considered instead of simply being knee-jerk and overly punitive.


hint: when there is something that it might be a good idea for congress to have an eye on, they're perennially asleep at the switch:
http://www.ritholtz.com/blog/2010/03/sec-defective-by-design/

in one of the few areas where it would have absolutely made sense "for the government to expand"....

...the delays in their processes also winds up costing businesses...and by proxy, consumers. example #102938 of governmental failure. cant even efficiently and clearly enunciate and enforce the rules they create.

bad enough they create too many rules, but then they dont keep up the proper infrastructure to support what they've created, because as usual what they've created becomes overly behemoth and creates an entirely new set of problems.

not to mention wind up being staffed by....

[JoeyB]

Cuz I rarely start something serious...and so people respect that and keep it serious. I joke and kid around enough in other threads. :D

Fair enough Jez! I just expect a certain frivolity from your threads. That comment had nothing to do with your clothes.