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European commission proposes using UK contributions towards Greek bailout European commission proposes using UK contributions towards Greek bailout
(about 1 hour later)
The European commission has defied George Osborne by formally proposing an emergency loan for Greece through an EU-wide bailout fund using up to £850m of British contributions. The European commission has defied George Osborne, the UK chancellor, by formally proposing an emergency loan for Greece through an EU-wide bailout fund using up to £850m of British contributions.
The proposed use of the European Financial Stability Mechanism fund is a blow to the UK, because David Cameron thought he had secured in 2010 a “black and white” British opt-out from participating in any further bailouts for eurozone countries.The proposed use of the European Financial Stability Mechanism fund is a blow to the UK, because David Cameron thought he had secured in 2010 a “black and white” British opt-out from participating in any further bailouts for eurozone countries.
In the 2015 Conservative manifesto, Cameron claimed: “We took Britain out of eurozone bailouts - the first ever return of powers from Brussels.” In the 2015 Conservative manifesto, the prime minister claimed: “We took Britain out of eurozone bailouts – the first ever return of powers from Brussels.”
However, with Greece needing an emergency cash lifeline of €7bn by Monday, the European commission has concluded this is the best way of avoiding a catastrophic banking collapse in the country.However, with Greece needing an emergency cash lifeline of €7bn by Monday, the European commission has concluded this is the best way of avoiding a catastrophic banking collapse in the country.
Germany has expressed scepticism about reviving the EFSM, as have countries such as Denmark and the Czech Republic.Germany has expressed scepticism about reviving the EFSM, as have countries such as Denmark and the Czech Republic.
But the commission formally proposed using the EFSM on Wednesday “in the absence of a better solution” and a decision will now be made by the council of finance ministers.But the commission formally proposed using the EFSM on Wednesday “in the absence of a better solution” and a decision will now be made by the council of finance ministers.
Valdis Dombrovkis, the euro commissioner, said it was “not an easy solution” and the group would have to “work to address concerns of non-euro members” so that they have enough guarantees against any negative financial consequences.Valdis Dombrovkis, the euro commissioner, said it was “not an easy solution” and the group would have to “work to address concerns of non-euro members” so that they have enough guarantees against any negative financial consequences.
On Tuesday, Osborne insisted he would oppose any deal in which UK taxpayer cash was put on the line, arguing that the “eurozone needs to foot its own bill” On Tuesday, Osborne insisted he would oppose any deal in which UK taxpayer cash was put on the line, arguing that the “eurozone needs to foot its own bill”.
However, he may end up having to back down and accept the use of the EFSM as long as Britain and other non-eurozone countries are given an extra indemnity against losses. However, he may end up having to back down and accept the use of the EFSM as long as Britain and other non-eurozone countries are given an extra indemnity against losses. If this happens, Osborne is likely to argue that guarantees against losses means UK taxpayer cash is not in jeopardy.
If this happens, Osborne is likely to argue that guarantees against losses means UK taxpayer cash is not in jeopardy.
Treasury sources have told Sky News they could consider the use of the EFSM “viable” as long as there are indemnities.Treasury sources have told Sky News they could consider the use of the EFSM “viable” as long as there are indemnities.
Speaking in the House of Commons, Cameron insisted it was “not for us to bail out Greece” but he was not pushed on the use of the EFSM by Harriet Harman, the acting Labour leader.Speaking in the House of Commons, Cameron insisted it was “not for us to bail out Greece” but he was not pushed on the use of the EFSM by Harriet Harman, the acting Labour leader.
“We are not involved in the debate directly because we are not in the euro,” Cameron said.“We are not involved in the debate directly because we are not in the euro,” Cameron said.
The prime minister also asked about the International Monetary Fund’s concerns that the current bailout proposals will not sort out Greece’s parlous financial situation.The prime minister also asked about the International Monetary Fund’s concerns that the current bailout proposals will not sort out Greece’s parlous financial situation.
He said the government talked to the IMF on a “very regular basis” and the organisation’s suggestion that debt relief would be needed “must be right”.He said the government talked to the IMF on a “very regular basis” and the organisation’s suggestion that debt relief would be needed “must be right”.