The European Commission has said euro zone member states will have to decide if a deal between Finland and Greece on collateral for financial support to Athens is in line with the agreement on the bail-out agreed last month.
Euro area member states had agreed at the July summit to allow a collateral agreement for helping Greece to be put in place 'where appropriate', Commission spokesman Amadeu Altafaj told reporters. He said euro zone states were considering the Finnish-Greek agreement.
Finland said earlier this week that it had laid down a framework with Greece for collateral against Finland's guarantee on its part of a second Greek debt bail-out worth €159 billion agreed last month.
Yesterday, Slovakia said all European states contributing to the Greek bail-out should be given collateral for the aid.
Austria today proposed linking demands from euro zone states for collateral on loans to Greece to how much protection each country's financial sector will secure in a parallel private sector bail-out for Athens.
Earlier, Greek finance minister Evangelos Venizelos said Greece's economy could shrink by more than 4.5% this year, a much worse figure than the current 3.8% fall anticipated under its bail-out programme.
He also said for the first time that a bond rollover that is part of its second €160 billion bail-out programme was unlikely before October.
He told a Greek radio station that euro zone parliaments needed to vote on the measures, while the banks and insurance companies also had to go through their procedures.
At an emergency meeting last month, euro zone countries agreed to provide Greece with another €109 billion, with an additional €50 billion in assistance to come from the private sector through a voluntary rollover of bonds.
Under the plan, banks and insurance companies holding Greek sovereign bonds could swap them for longer-term ones, extending the repayment deadlines to give Greece breathing space and effectively reducing its debt.
Venizelos said Greece wanted to complete the rollover as soon as possible but 'the private sector is waiting for guarantees' from the euro zone states, while euro zone states 'are waiting to see the negotiations with the private sector advance favourably'.
He said Greece currently had enough funds available, with €45 billion under its first €110 billion EU-IMF bail-out programme agreed in May 2010.
The next tranche of funds under that bail-out is expected to be disbursed next month, with EU and IMF experts currently in Athens to audits its fiscal performance.
