Finland’s finance minister said she expects “long and difficult” talks with Spain on the collateral to be offered to the Nordic country in exchange for aid to the Iberian nation’s ailing banks.
“We represent the hard line. We have strict conditions and I think that’s good because we’re trying to protect Finnish taxpayers from risk,” Jutta Urpilainen told Finland’s public television.
She said she has already informed her euro-zone counterparts that Finland will not contribute to a European rescue of Spain’s banking system if Madrid does not provide collateral for the first tranches of the loan package, since it appears they will come from the temporary European Financial Stability Facility (EFSF).
She added that following the launch of the permanent European Stability Mechanism (ESM), currently in the process of being ratified by the euro-zone member states, collateral will not be necessary for fresh loans because taxpayers will have seniority.
The ESM’s treaty provides it with preferred-lender status, although the wording of an agreement reached at a euro-zone summit last week indicates that won’t apply in the case of loans to Spain’s banks.
Finland, however, says contributor nations could still have seniority in the case of funds directly paid out of the ESM, as opposed to those transferred to the ESM from the EFSF.
The minister said Helsinki “wants to resolve the European crisis” because a solution will benefit “Finnish taxpayers, employees and retirees” but that it cannot sign just any accord because it could bring negative consequences.
Urpilainen, who said she does not know if other countries also will demand collateral from Spain, predicted that talks with Prime Minister Mariano Rajoy’s government could begin in the coming weeks once the total amount of the aid package is determined.
She said, however, that she expects to obtain more information about the loan at a July 9 meeting of euro-zone finance ministers.
Euro-zone finance ministers last month agreed to extend a lifeline of up to 100 billion euros ($125 billion) for troubled Spanish banks and Rajoy’s government formally requested the aid package on June 26.
During the euro-zone summit later that week, Spain also secured an agreement on direct recapitalization by its euro-zone partners of its bad loan-saddled banks.
The Iberian nation’s economy has been battered in recent years by the global recession and the collapse of a massive real-estate bubble, which has left banks saddled with toxic property assets.
The overall unemployment rate stands at almost 25 percent and nearly half of Spaniards under 25 are jobless, while tens of thousands of families have been evicted from their homes after falling behind on their mortgages.