What’s A Few Hundred Billion Between Friends…? Part II

In our post last week, we set out the current state of play regarding the ratification of the expansion of the EFSF by the 17 eurozone’s members’ parliaments.

Since then, the Austrian and Estonian parliaments have ratified the EFSF expansion as expected. The Netherlands has followed suit this evening, with 96 MPs voting in favour and 44 against.

However, an interesting (and unforeseen) development has occurred in Malta, where it was announced that the vote would be delayed after new legal questions were raised by a former prime minister. The debate is set to resume on Monday, with a vote expected the same day.

Meanwhile in Slovakia, which at one point looked like it might scupper the whole deal, it appears a consensus is now at hand. The Freedom and Solidarity party, which had been the source of discontent within the country’s governing coalition, has put forward a proposal to establish a parliamentary committee with the power to veto individual loans made under the EFSF, which looks likely to be accepted by the other parties.

Although the final approvals of the EFSF upgrade by member states' legislatures appear to be inevitable, as we've argued in our previous post, this will only mark the end of a particular chapter in the ongoing crisis, the Endgame is not even in sight yet...

Malteaser

A tasty development coming out of tiny Malta today – the Maltese government plans to ask for collateral on its loans to Greece.

Maltese Finance Minister Tonio Fenech said:

“I can confirm that at a recent meeting of the Eurogroup in Poland, Malta officially requested to be treated like Finland where it comes to collateral. All member states should be treated the same and we are insisting on this.”

So, also Malta is now echoing recent calls for equality in the eurozone as well. Many involved in the negotiations might be irked by this late call from a country with such a small contribution. However, in all fairness to Malta their contribution does amount to around 6.5% of their GDP, so clearly not a pittance to them. That more countries are coming out of the woodwork against this collateral deal just highlights how rushed and poorly thought out the second Greek bailout is.

As for what form the collateral deal will take – shockingly – no new developments. This, despite eurozone leaders saying we would have an agreement in one week, two weeks ago. Currently, it looks as if some collateral arrangement will be made available to all but it is likely to be so complex and costly that only those who have to accept it due to domestic constraints (Finland because of a deal with its parliament, Austria and Netherlands because of the growing Eurosceptic parties and Malta for, well, possibly for actual economic reasons) will choose to.

More meetings to come for sure - although it seems that this issue has taken a backseat to the topics of looming Greek default and financial market meltdown. Not that we can blame the eurozone leaders for that, it’s just, when you have so many balls in the air, one is bound to drop. Unfortunately if unexpected, that would mean disaster for the global economy.

Actually, come to think of it, we can and do blame eurozone leaders for that since they should have dealt with this problem head on a long time ago.