A debate over which eurozone countries can demand collateral from Greece in exchange for loan guarantees threatens to derail the quick approval of Athens' second bailout programme, experts warn.
"Finland has said right from the beginning that it would not back any loans without collateral, and if this arrangement is no longer acceptable to other nations, then it takes us back to square one," Teija Tiilikainen, head of the Finnish Institute of International Affairs, told AFP.
When eurozone leaders agreed on a 160-billion-euro ($230 billion) Greek rescue plan in July, Finland, which is one of only six EU nations with a top triple-A credit rating, was assured it could seek collateral for its portion of guarantees issued to raise bailout funds.
Helsinki reached a deal with Athens in this past week and immediately some of the other 16 nations which use the euro cried foul.
"We've struck a deal with Greece and now it's up to the other eurozone nations to approve it," Finance Minister Jutta Urpilainen told reporters Wednesday.
Analysts at BofA Merrill Lynch Global Research said that the deal between Finland and Greece raises concerns since it "effectively voids much of the contribution of the former to the new EFSF financing package for the latter."
The eurozone's contribution to the bailout will be made via its European Financial Stability Facility, which raises money on the bond markets on the basis of guarantees issued by highly-rated members.
Slovakian Finance Minister Ivan Miklos said Thursday that if Athens agreed to provide collateral to Helsinki, then all EU creditor states should get collateral as well.
The finance ministries of Austria and the Netherlands, also AAA-rated countries, have indicated that they would also seek collateral if Finland receives it.
Greece said Friday it had yet to receive requests for collateral from any other country.
"If there are requestes from other countries, it will be up to the Eurogroup (of eurozone finance ministers) to find a solution," Greek Finance Minister Evangelos Venizelos said on an Athens radio station.
Chief analyst for Nordea Bank Jan von Gerich told the leading Finnish daily Helsingin Sanomat that Greece simply cannot afford to do so.
"Greece does not have the means to hand out these kinds of guarantees, or else the entire loan package will have to be increased substantially," von Gerich said.
Guntram Wolff, from the Brussels-based Bruegel think-tank Bruegel, says Finland's collateral deal could shake the foundations of the entire rescue package.
"If all of these countries would do as Finland does, then this would significantly reduce the amount of effective loans given to Greece. And in that sense, the Finnish-Greek deal (risks) jeopardise the whole package for Greece," he said.
The Finnish finance ministry refused to comment on the debate but one official noted that Finland had transparently insisted on collateral for most of this year and so the deal should not have come as a surprise.
Eurozone bailouts were a hot-button topic leading up to Finland's general elections in April.
Urpilainen's Social Democrats, the second-largest party, insisted they would not be part of a government that approved loans without collateral, and parliament ratified the demand as a criteria for extending guarantees.
Tiilikainen predicted that the sudden interest in collateral would trigger a re-examination of the fine print in the Greek bailout, to see how much special dispensation could be granted to Finland.
"In the next few days we'll find out if it's acceptable that collateral only be given to Finland, since the bailout was a very difficult political issue for us, or whether we have to open up the whole rescue package again," said Tiilikainen.
The eurozone was under intense pressure from the markets to quickly put into place a second rescue programme for Greece as it was evident the 110-billion-euro bailout agreed in May 2010 would not be sufficient.
Any doubts about the second bailout going through would likely only stoke the turmoil on the markets further given persistent fears that the eurozone debt crisis will see some countries default on their debt.