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08/12/2016

Dombrovskis: EFSM is ‘best possible’ solution for Greece

Euro & Finance

Dombrovskis: EFSM is ‘best possible’ solution for Greece

Commission Vice-President Valdis Dombrovskis called on the co-legislators to adopt the CMU proposals in the pipeline.

[European Parliament/Flickr]

The European Financial Stability Mechanism (EFSM) is the best means to provide short-term financing for Greece, Commission Vice-President Valdis Dombrovskis said on Wednesday (15 July), putting him on a collision course with Britain, which refuses to contribute to the new Greek rescue programme.

“Given the obvious absence of any other better solution, the best possible avenue left is the EFSM programme,” he told a news conference in Brussels.

“We are aware of serious concerns from non-euro area member states. We are therefore working on arrangements to protect the non-euro area member states from any negative financial consequences to the EFSM loans not being repaid,” he said.

While it waits for a bailout deal sealed on Monday (13 July) to kick in, Athens desperately needs money for several imminent payments including €7 billion owed to the European Central Bank (ECB) this coming Monday (20 July).

But Britain, which does not use the euro, has already vowed to resist any bid to use the European Financial Stabilisation Mechanism (EFSM), an emergency fund, saying aid should come from the 19-country eurozone and not the full 28-nation EU.

>> Read: Britain resists contributing to new Greek bailout

EU officials told AFP that the Commission, the EU’s executive arm led by Jean-Claude Juncker, had “prepared these proposals and submitted them to the (European) Council”, which groups the leaders of the 28 member states.

This was “in case we do not find another solution” for financing Greece until mid-August, one official said.

The short-term bridge loan would be for seven billion euros, and would ideally only be needed for four weeks until the new bailout programme is in place, officials said. British Finance Minister George Osborne rejected any attempt to use the fund at a meeting in Brussels on Tuesday, saying it was a “complete non-starter.”

But the EU’s complex voting rules mean that any decision on whether to use the fund would be by a weighted majority, meaning that Britain could not veto it and would have to rally other states if it wanted to block the move.

Germany’s hawkish Finance Minister Wolfgang Schäuble expressed doubts about the “not very constructive” Commission plan, but it is not clear which way Berlin would vote on the matter.

Also Denmark, the Czech Republic and Sweden, as EurActiv has reported, are against using EFSM money for Greece’s bridge financing.

>>Read: Scandinavians back Britain’s rejection of Greek bridge financing

The Commission was now in discussions to find ways to “reassure” non-euro states, including options for collateral, to ensure that any money from the EU budget is recouped, EU diplomats said.

Background

Greece’s leftist Prime Minister Alexis Tsipras agreed to tough reforms after 17 hours of gruelling negotiations in return for a three-year bailout worth up to €86 billion.

If approved, this will be the third rescue programme for Greece in five years. It will be managed by the European Stability Mechanism (ESM), the eurozone permanent crisis resolution fund that was initially set up five years ago in an effort to save Athens from bankruptcy.

“There won’t be a Grexit,” said Jean-Claude Juncker, the President of the European Commission after all-night discussions came to a close on Monday 9:00 AM Brussels time.

>> Read: Eurozone reaches ‘laborious’ tentative deal on Greece

Timeline

  • 20 July: Greece has to make a €7 billion repay to the European Central Bank.