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04/12/2016

Britain resists contributing to new Greek bailout

UK & Europe

Britain resists contributing to new Greek bailout

David Cameron and Donald Tusk

[European Council]

British Finance Minister George Osborne will seek to block any move by the European Union to include British money in a new bailout programme for Greece, according to press reports on Tuesday (14 July).

Osborne held a series of telephone conversations with his counterparts ahead of a meeting in Brussels on Tuesday to underline Britain’s opposition to participating in a bailout, the Financial Times and other media reported.

“Our eurozone colleagues have received the message loud and clear that it would not be acceptable for this issue of British support for eurozone bailouts to be revisited,” a source in Britain’s Treasury said.

“The idea that British taxpayers’ money is going to be on the line in this latest Greek deal is a non-starter.”

In 2010, Prime Minister David Cameron announced that he had reached an agreement that an emergency fund involving all 28 members of the EU, the European Financial Stabilisation Mechanism (EFSM), would no longer be used to underwrite bailouts of eurozone countries, after it was used to assist Ireland and Portugal.

Instead, only the 19 members of the single currency should have the responsibility to underwrite bailouts, with a new fund set up to be ready for use in case of crises like that in Greece.

However, British media on Monday reported that European Commission President Jean-Claude Juncker proposed to revive the EFSM fund to use as collateral against short-term loans to Greece.

A spokesman for Cameron’s Downing Street office said the prime minister believed that the original agreement stood and that the EFSM would not be used again.

“Leaders from across the EU agreed in 2010 that the EFSM would not be used again for those in the euro area, and that remains the prime minister’s view,” the spokesman said.

“We have not received a proposal and one is not on the table.”

Cameron has promised a referendum on Britain’s membership of the EU before the end of 2017, in response to rising support for the anti-EU UK Independence Party and pressure from the eurosceptic wing of his Conservative Party.

A poll in March by NatCen Social Research showed that 35% of British people wanted their country to leave the EU, compared to 57% who wanted to remain within it.

Eurozone leaders on Monday (13 July) struck a deal to stop debt-stricken Greece from exiting the euro, in return for a pledge by Athens to enact severe reforms in the coming days.

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

  • By 15 July: Greek Parliament expected to vote on the new "conditions" imposed by Greece's international creditors in return for the bailout plan
  • 17 July: German Bundestag expected to vote on teh third bailout package for Greece
  • By 22 July: Greece expected to approve a major overhaul of the country's civil justice system and transpose the EU Bank Recovery and Resolution Directive (BRRD) into national law