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Greece takes first step towards bailout rescue

Published 16/07/2015

Greek prime minister Alexis Tsipras delivers his speech to parliament before the austerity bill vote (AP)
Greek prime minister Alexis Tsipras delivers his speech to parliament before the austerity bill vote (AP)

The Greek parliament has voted overwhelmingly to pass austerity measures demanded by international creditors, paving the way for a multi-billion pound rescue of the country from financial ruin.

The measures, including VAT increases and pension curbs, passed amid opposition from within the governing Syriza party and anti-austerity demonstrations which descended into violence.

In passing the bill, by 229 votes to 64, Greek MPs took the first step required to begin negotiations on a new bailout package worth 85 billion euros (£60bn).

Meanwhile, David Cameron has insisted Britain will not bail Greece out, following proposals that could land the UK taxpayer with liabilities running into hundreds of millions of pounds.

The European Commission has submitted a formal proposal to use an EU-wide rescue fund to provide bridging loans to allow Athens to meet upcoming debt payments to the European Central Bank (ECB) and International Monetary Fund (IMF).

But the Prime Minister said sorting out the problems of the single currency was a "matter for eurozone countries".

Earlier, Downing Street confirmed that the plans to use the European Financial Stabilisation Mechanism (EFSM) were discussed by senior officials from member states in Brussels yesterday morning.

Using the fund - of which the UK pays around 14% - to secure 8.6 billion euro (£6.1 billion) in loans to Athens could expose the Treasury to £850 million of liabilities in the event of a default.

A decision to use EFSM must be approved by ministers of the 28 EU member states, in a qualified majority vote in which the UK has no veto.

Concerns have also been raised about the stability of the bailout after a leaked IMF report emerged that suggested the new deal will not solve Greece's problems, and its debts could rise further to 200% of GDP.

Mr Cameron said that 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".

At Prime Minister's Questions, he added: "It is not for Britain to bail out eurozone countries and we wouldn't do that.

"But as a member of the European Union, if Greece were, for instance, to leave the euro and wanted humanitarian assistance, I'm sure that this House and the British public would take a more generous view.

"Sorting out the problems of the eurozone, which we have always warned about the dangers of this eurozone, is a matter for eurozone countries."

Greece has a 4.2 billion euro (£3bn) debt repayment to the ECB on July 20. It is also in arrears on about two billion euros (£1.3bn) owed to the IMF since June 30.

The new bailout deal fuelled anger among Greek prime minister Alexis Tsipras' party, with promiment members inclduing energy minister Panagiotis Lafazanis and former finance minister Yanis Varoufakis voting against the austerity bill.

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