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Tuesday, August 16, 2011 4:28 PM

Amazingly Absurd Loan "Guarantee" Arrangement Between Finland and Greece

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The idiocy of the day comes from Finnish Finance Minister Jutta Urpilainen regarding loan guarantees for the bailout of Greece.

Please consider Finland and Greece agree on loan guarantees

Finance Minister Jutta Urpilainen said in a Tuesday press conference that Finland and Greece have reached common ground on loan guarantees demanded by Finland for its participation in the Greek bailout package. The agreement still requires approval from other eurozone states.

The Finnish and Greek Finance Ministries have agreed that the Greek state will transfer a sum to the Finnish state, which, together with interest on that sum, will serve to guarantee Finland's share in the bailout loan to the troubled southern state.

The guarantee sum would, however, be only a fraction of the money that Finland is contributing to the rescue package.

Urpilainen has not divulged a concrete sum, because that is still being negotiated.
Got That?

If not, let me explain by an two-point analogy.

  • You agree to give a homeless drug addict on skid row $10.
  • In return, he immediately hands back to you $1 as a "guarantee" he will pay back the other $9, with interest, at an agreed upon rate.

Clearly there is no guarantee of anything. Rather the initial effective loan amount is reduced by the amount of the alleged guarantee.

Urpilainen is looking for approval of her nonsensical proposal from the rest of Eurozone states. I hope they have enough sense to laugh in her face. However, the proposal is so stupid, EU officials just might seriously debate it

Mike "Mish" Shedlock
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