Second supplementary budget for 2010: Finland's loan to Greece totals EUR 1.6 billion
The Government is submitting a proposal to Parliament for an addition in appropriations totalling EUR 1.6 billion as Finland's share of the financial package for Greece. It is expected that Greece will raise EUR 555 million from the lending programme this year. The purpose of the loans is to safeguard financial stability in the euro area and to prevent contagion of instability to other economies in the euro area. The aim is to achieve parliamentary approval for the second supplementary budget as swiftly as possible.
Finland expects to be able to receive a higher interest on the loans to Greece than it will be incurring for the debt. One of the conditions for the loans is that the Greek government adheres to the economic programme enshrined in the financial package. The Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) will oversee the implementation of the policy conditionality. The three-year deal means that repayment of the loans would start three years after disbursement and would be complete in the course of two years. Thus, debt servicing for loan instalments granted in May 2010 would start in May 2013.
On 23 April 2010 Greece formally requested for emergency loans. The finance ministers of the euro area member states decided in a meeting held on 2 May 2010 to activate a lending package. The decision is based on Commission and ECB assessments that, to secure financial stability in the euro area as a whole, it is essential to activate a lending package for Greece. The heads of state of the member states are due to consider the matter in their meeting on 7 May 2010.
The lending programme makes available EUR 110 billion to help Greece meet its financing needs. The programme is a three-year deal extending to 2013. The IMF would cover at most EUR 30 billion of the package, and the euro area Member States would contribute for their part EUR 80 billion, of which up to EUR 30 billion in the first year. Under the current terms, Finland's share would amount to 1.85% of the total programme.
The loans could be activated once a minimum of five euro area member states whose share of the lending totals at least 2/3 of the overall deal have reached a parliamentary decision to participate in the programme. Once the rest of the euro area member states later finalize their national procedures (e.g. parliamentary approval) enabling them to take part, the lending ratios of each member state would be recalibrated, and those whose initial contribution was above their own share would compensated.
The default is that all euro area member states would take part in the lending programme. However, provision is made in the deal that certain member states may not be able to participate or might have to exit at some point during the programme. The overall total of the loans would not decrease, however. It would instead be redistributed among the remaining member states.
The additional appropriations are to be financed by borrowing, meaning that government net borrowing would rise to EUR 13.9 billion in 2010.
Inquiries:
Mr Martti Hetemäki, Permanent Under-Secretary, tel. 358 9 160 33091 and
Ms Asta Niskanen, Financial Counsellor, tel. 358 9 160 33132