Rating agency Moody's, which considers Athens to be nearly insolvent, has warned the 17 members of the eurozone that the current controversy surrounding Finland's demand for collateral from Greece could delay the implementation of the latest aid package and push the debt-plagued Mediterranean state into the financial abyss.

The Finnish government, under pressure by a powerful euroskeptic party in parliament, negotiated a bilateral agreement with Greece in which Athens would have to deposit cash in Helsinki as collateral in order to secure Finland's future participation in the bailout. In effect, Greece would be depositing aid money from other eurozone states in Finland, pushing a further burden on the currency bloc's two major economies, France and Germany.

The German government's spokesman, Steffen Seibert, expressed doubt on Monday that such a solution could be approved within the eurozone. The bilateral agreement also raised concern within the European Commission in Brussels.

'Lex Finland'

Finland bases its demand on a provision passed during the eurozone's emergency summit at the end of July. According to this provision, creditors are allowed to demand collateral from Greece.

But Dutch Finance Minister Jan Kees de Jager, whose country belongs to the solvent eurozone states, views the Finnish demand for collateral as illegal. The deal between Athens and Helsinki has to be approved by the remaining 15 eurozone states, according to de Jager.

Austria and Slovakia have announced they also will demand collateral in exchange for their participation in the bailout of Greece. Austrian Finance Minister Maria Fekter already said last week this is no "lex Finland," in other words, there is no special right that applies to the Finns. In fact, the provision passed during the summit was formulated quite loosely - individual countries are not named.

European solidarity

A spokesperson for the Dutch Finance Ministry suggested that if Finland receives collateral for its credit, then the Netherlands will demand the same. According to Moody's, if more and more states abandon the solidarity of the bailout fund and push the risks on to larger states such as France and Germany, then further aid funds for Greece will likely be delayed. In the worst case scenario, Moody's would consider the move to be a default.

EU Monetary Commissioner Olli Rehn has called on the eurozone's finance ministers to put this discussion aside until the end of August, since Greece will already require its next installment of 8 billion euros ($11.5 billion) from the bailout fund in the middle of September.

Right now, accountants from the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) are in Athens checking Greece's figures on economic growth, revenue and debt. The next payment from the bailout fund depends on the result of this audit.

Author: Bernd Riegert / slk
Editor: Martin Kuebler