Scandinavians back Britain’s rejection of Greek bridge financing

Magdalena Andersson

Magdalena Andersson, Sweden's finance minister. [Socialdemokraterna/Flickr]

The Danish and Swedish finance ministers backed their British counterpart, George Osborne, on Tuesday (14 July), saying an EU emergency fund should not be used for Greece’s bridge financing. 

According to reports, Czech Finance Minister Andrej Babiš also supports Osborne’s view.

Earlier on Tuesday, Osborne had said he would block any move by the EU to include British money in a new bailout programme for Greece.

Jean-Claude Juncker, President of the European Commission, has proposed reviving the European Financial Stabilisation Mechanism (EFSM) fund to use as collateral against short-term loans to Greece. The EFSM is an emergency funding programme that can provide up to €60 billion in support to any EU member state.

The Eurogroup discussed whether this fund could be used as bridge financing for Greece before a third bailout for the debt-ridden country is agreed. Greece has an upcoming payment to the European Central Bank (ECB) worth €7 billion on Monday (20 July). 

Since the fund’s money comes from the whole of the EU, and not just the eurozone, a mandate from the 28-member EU bloc is needed to use it.

>> Read: Britain resists contributing to new Greek bailout

In 2010, British Prime Minister David Cameron insisted that the EFSM should no longer be used to underwrite bailouts for eurozone countries, after it was used to assist Ireland and Portugal. Instead, only the 19 members of the single currency would have the responsibility to underwrite bailouts, using another crisis instrument, the European Stability Mechanism (ESM).

Speaking at the doorstep of a Council meeting between EU finance ministers on Tuesday, Swedish Minister of Finance Magdalena Andersson referred to Cameron’s 2010 agreement, saying that only ESM money should be used for Greece’s bridge financing. 

“I expect that we stick to this agreement,” Andersson said.

Regarding Swedish loans for Greece, Andersson said she would listen to what the eurozone countries have in mind.

“If they discuss Greece and questions that relate to all EU countries, even those who are not part of the eurozone, then we need to see their proposals, but there are also other options such as technical assistance. There are other ways to help out,” she added.

Claus Hjort Frederiksen, the Danish Finance Minister, agreed, saying Denmark was not yet in a position to back the idea of using EFSM money for Greece.

“We have not been part of the negotiations so I need to hear what the Eurogroup has to say and then we will make a decision,” Frederiksen said.

Valdis Dombrovskis, the European Commission Vice-President in charge of the Euro and Social Dialogue, confirmed after the finance ministers meeting that different options regarding Greece’s bridge financing were being explored, including using the EFSM fund.

“I can confirm that concerns were raised by several non-euro area member states. This is certainly also something we need to take into account. Now is about determining what is the best option,” Dombrovskis said.

“Pretty much all options are quite difficult,” he conceded.

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

  • 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

Subscribe to our newsletters