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The agreement, a condition for Finland's participation in the new 130-billion-euro bailout package for Athens, states that leading Greek banks will provide collateral in cash and highly rated assets. Finnish Finance Minister Jutta Urpilainen and her Greek counterpart, Evangelos Venizelos, signed the deal in Brussels behind closed doors on Monday.

The loan guarantees cover 40 percent of Finland's share of the bailout package. Under the deal, Greece will transfer one billion euros in bonds into an escrow account. Should Greece default on its loan, Finland will see its money in 15 to 30 years.

Eurozone finance ministers are expected to approve a second financing package for Greece on Monday, which aims to reduce Greek debt towards 120 percent of gross domestic product by 2020 from 160 percent now.

Approval of the new, 130-billion-euro financing package, which will come on top of a 110-billion-euro bailout granted in May 2010, will set in motion a debt restructuring that aims to halve Greece's privately held debt.

Internal politics at play
Loan guarantees, spearheaded by Urpilainen's Social Democrats, became a key theme in last spring's parliamentary elections, which were characterised by widespread anti-EU sentiment. The bilateral accord has been a point of contention among other eurozone states, as Finland's demand has been a long-running obstacle to the bailout.

On the home front, the nationalist, anti-EU Finns Party criticised news of the side-deal, saying it only covered a fraction of the risk involved in the rescue package. The opposition was quick to point out that Finland is the only country that demanded collateral as a precondition for the bailout. Critics have suggested that election promises weighed more in the government's guarantee demand than any other considerations.


YLE, Reuters