Belfast Telegraph

UK Website Of The Year

Home News UK

UK will not bail out Greece, David Cameron insists

Published 15/07/2015

Greek prime minister Alexis Tsipras is struggling to get the austerity package through parliament
Greek prime minister Alexis Tsipras is struggling to get the austerity package through parliament

Britain will not bail out Greece but could offer the country humanitarian aid if it crashes out of the eurozone, David Cameron has said.

The Prime Minister insisted sorting out the problems of the single currency was a "matter for eurozone countries" a fter the European Commission put forward proposals that could land Britain with liabilities running into hundreds of millions of pounds.

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."

The 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 and International Monetary Fund.

Downing Street has confirmed that the plans to use the European Financial Stabilisation Mechanism (EFSM) were discussed by senior officials from member states in Brussels on Wednesday 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.

The Prime Minister's official spokeswoman said: "We have always been clear that British taxpayers' money is not going to be used to provide financing for a eurozone/Greek deal, and that therefore this is a non-starter.

"There was a unanimous deal reached at the European Council in 2010 that the British taxpayer would not be required to support a eurozone member.

"From the discussions taking place today, it is clear that a number of other countries have concerns."

Mr Cameron declared in 2010 that he had won a "clear and unanimous agreement" that the EFSM would no longer be used to underwrite bailouts of struggling eurozone countries.

Instead, responsibility was supposed to fall only on member states using the single currency under a new permanent mechanism specifically set up to deal with crises like that in Greece.

But the deal was not legally binding, allowing European Commission president Jean-Claude Juncker to float the use of the EFSM to deal with Greece's short-term financing needs.

The row is likely to be discussed by Chancellor George Osborne, who yesterday insisted that the suggestion that UK money could be used to underwrite the deal was "a complete non-starter", in scheduled talks with his German counterpart Wolfgang Schaeuble in Berlin today.

Greek PM Alexis Tsipras was facing a battle to secure parliamentary approval for a bailout deal which he has himself admitted he does not "believe in".

A major rebellion within his Syriza party and coalition partners is expected to leave Mr Tsipras relying on opposition votes to get backing for the austerity measures demanded in return for the bailout.

Failure to get the proposals - including VAT increases and pension curbs - through parliament could see Greece go bust within days and potentially exit the currency union.

Speaking in Brussels, Commission vice-president Valdis Dombrovskis said that use of the EFSM was "the best possible avenue" to enable Greece to meet its obligations, but acknowledged that it was "not an easy option" and had sparked "serious concerns" among several EU states outside the single currency area.

Mr Dombrovskis indicated that any EFSM loan would be repaid after three months from money being made available to Greece under the eurozone-only European Stability Mechanism (ESM).

And he indicated that arrangements were being made to protect non-eurozone states from losses if the loan was not repaid.

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.

Mr Dombrovskis said: "Greece faces urgent financing needs. It has outstanding payments and arrears to the ECB and IMF that need to be paid in the coming days."

In order to allow Athens to meet hese obligations, "given the obvious absence of any other better solution, the best possible avenue left is the EFSM programme," he said.

"The Commission, responding to the request from the Greek authorities, has proposed to the Council to grant short-term emergency assistance up to three months from the EFSM to build the bridge needed until the ESM programme is in place. The EFSM loans will then be repaid with the money from ESM disbursements.

"This is not an easy option. We are aware of serious concerns from non-euro area member states.

"We are therefore working on arrangements to protect the non-euro area states from any negative financial consequences should the EFSM loans not be repaid.

"At the time ESM was put in place, the heads of state and government agreed not to use EFSM. Therefore some member states had serious concerns. We need to address this political difficulty."

Mr Dombrovskis said that the Commission was seeking to use seven billion euros (£5bn) from the EFSM for three months to cover imminent repayments and arrears. Further financing needs coming up in August would depend on how quickly the ESM facility can be put in place, he said.

Greece has a 4.2 billion euro (£3bn) debt repayment to the ECB on July 20. It is also in arrears on about 1.5 billion euro (£1bn) owed to the IMF since June 30.

Your Comments

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting?

Read More

From Belfast Telegraph