Wednesday 24 August 2011

Eurozone issues collateral and honesty

The Finnish government has (admittedly, because of domestic political weakness) consistently demanded collateral for the second bail-out of Greece. This precondition was, somewhat obscurely, recognised by the eurozone summit 21 July 2011.

Protesilaos Stavrou

The euroblogger Protesilaos Stavrou has written an interesting piece on the effect of the demands for collateral as a precondition for approval of the second bail-out of Greece: Demands for collaterals show lack of a collective spirit (24 August 2011).

Finland set the snowball rolling, so I wrote two blog posts about the root causes and the events in Finnish: Suomi näyttää: Euroalue on korttitalo (23 August) and Suomen Kreikka-vakuudet vastatuulessa: Mistä tämä kertoo? (24 August 2011). (Why not try machine translation?)

Eurozone summit

The government of Finland has, admittedly as a result of domestic electoral politics, set collateral as a precondition for participating in the second bail-out package for Greece.

Although preparation for and discussions in Euro Group and Council meetings remain murky for outsiders, these aspirations have been aired publicly long and often enough. They come as no surprise for the euro area partners.

The eurozone summit acknowledged this demand, although the language is less than crystal clear. See: Statement by the heads of state or government of the euro area and EU institutions; 21 July 2011; point 9:

9. Where appropriate, a collateral arrangement will be put in place so as to cover the risk arising to euro area Member States from their guarantees to the EFSF.

This agreement in principle was the basis for the deal between the Finnish and the Greek government, which the Ministry of Finance in Finland informed about in a 16 August 2011 press release (Finnish only).

The snowball effect and fears that the Greek rescue package could be delayed or even unravel, have suddenly led to a 'Nein' from Merkel and the need for new discussions to open the Gordian knot. For the government of Finland it is still a question of how, not if, collateral will be given.


Now, we should have the facts straight, in order to follow the next steps.

A few additional points.

I have little sympathy for populists who are keen to wreak havoc in the eurozone and consequently in the wider European and world economy, although I am far from certain that the structures of the eurozone are democratic and robust enough to succeed, or that the national political leaders are up to the challenges.

I understand that many people in the Mediterranean countries feel unkindly treated by less than generous remarks about their political system and national character.

However, the citizens and politicians in these countries need to take a deep and honest look in the mirror.

To put it crudely, can we expect European solidarity if citizens domestically cheat on each other through corruption or tax evasion?

Even if the lack of democracy and effectiveness at eurozone level are root causes of the euro area crisis, I would appreciate more reform-minded thinking from citizens in the weak eurozone countries, on how to enhance competitiveness, improve internal solidarity with regard to clientelism, tax-paying, corruption, governance, sustainable public finances etc. in order to embrace a brighter future in a globalising world and in Europe.



Follow and participate in the discussion about the eurozone and other European issues on multilingual, an important part of the European public space, with the new articles on 841 euroblogs just one click away.

Ralf Grahn


  1. Dear Mr. Grahn,

    I am Protesilaos Stavrou. I have noticed that you have made mention to my articles quite a few times. I really appreciate that and would like to thank you.

    Since you speak of the need of Mediterranean people to ask for reforms in their own countries (which I absolutely agree with), I would like to add a small extract from one of my previous articles regarding the situation in the Greek interior:

    "Greece has a huge trade deficit, meaning that it imports more than it exports (three times more in fact). It has an immense public sector, which is costly and unproductive. It has the most complicated bureaucracy in Europe, which makes foreign investment very difficult. It lacks an effective tax collection mechanism. Also certain classes of people have enjoyed outrageous benefits over the years, like retiring at their early or mid 50s'. Moreover the agricultural sector in the country, was devastated and massively reduced, thanks to the lack of any serious national plan for agricultural growth and due to the maladministration of European funds. These and many others are factors that make an economy malfunctional and unable to grow."

    and this: "[The crisis] is, among others, the end product of a series of actions carried out by a corrupt political system that accepted money from multinational firms such as Siemens and Goldman Sachs to serve the interests of some cliques at the expense of public funds. It is the end product of years of unbridled spending in non-productive ventures. It is the result of decades of maladministration."

    I am much more critical to Greece than to any other country. It is just that recently I happen to write about the factors outside Greece. Moreover my articles about the situation in Greece are mostly written in the Greek language, since they contain many details about internal politics that foreigners cannot easily follow.

    Greece itself is a deeply corrupted country, malfunctioning at every level, not organized and ill regulated. I just need to say this so as to demonstrate that there are many people in the European South that are critical of their own countries.

    Thank you very much,

    Yours Sincerely,

  2. Protesilaos Stavrou,

    I have enjoyed reading your blog(s) and wanted to entice my readers to notice them.

    I have appreciated your outspoken articles, which critically assess the structure and the deeds linked to the eurozone.

    I share may of your viewpoints, although not all of them.

    I hope that you continue on your path to become one of the most valued eurobloggers.

    We seem to agree on many of the deep cultural roots of political and economic problems of Greece (and other Mediterranean countries), which result in a lack of competitiveness.

    Whatever happens with the euro currency and the bailouts, these fundamental challenges need to be addressed.

    I markedly did not target you for failing to address these problems honestly, but under a separate headline summed up my impressions of the discussions I have been following and participating in with regard to the eurozone and the European Union.

    The eurozone problems we are facing seem to indicate that we as societies (332 million inhabitants, national electorates, national political leaders, institutional set-up) seem to have reached the limits of our comprehension and abilities.

    I am afraid that few of us are going to come out of this unscathed, but is the outcome what we deserve?

  3. Thank you,

    I am glad that we share similar views on a number of issues. It is encouraging that Europeans from different backgrounds find common grounds to discuss current affairs that in the end affect us all equally.

    The reason I felt the need to put down some of my writings on the Greek side of the crisis has to do with the fact that I have not made any reference to the internal dimension of the crisis in Greece, for some time now, which could possibly lead to wrong conclusions. I would not like that to happen.

    At any rate, regardless of who is the individual or the group of individuals towards whom your accurate statement was addressed, I must say that as a matter of principle, it is important to always keep in mind that we must first criticize our selves. I really appreciate that remark.

    Bringing this self-criticism to a European level I shall answer your question in the concluding line of your comment, by saying that perhaps we get what we deserve or what we are worth of, since quite a few of us were not as vigilant and/or active as they should be. A weak civil society cannot have a strong leadership and therefore cannot improve its institutions.

  4. Thank you for your comments.

    Since we live in democracies which have been accepted as members by the Council of Europe and the European Union, I am afraid that we (as societies) deserve the EU and the political leaders(hip) we have.

    However, I think we as individuals have an obligation to describe weaknesses and to outline improvements.

    I try to do my bit from the viewpoint of an EU citizen.


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