EU Wants UK to Contribute to Greek Bailout Loans
EU Commission President Jean-Claude Juncker rejected a deal that proposed to exempt the UK from contributing to bailout loans to Greece, owing to which Britain will now have to contribute as much as £1 billion. Chancellor George Osborne recently made an attempt to discard proposals to rescue Greece by raiding the EU budget.
Early on Sunday, EU leaders struggled with plans to rescue Greece from financial collapse. In an attempt to revive bailout funds, European Commission President Juncker proposed utilizing the EU budget as collateral for loans of €8.6 billion to Greece. This proposal discards an agreement that protects Britain from having to contribute to Eurozone bailouts.
After the signing of this agreement, David Cameron had informed the House of Commons that country will no longer have to contribute to bailouts. This deal was also used as proof of Cameron’s ability to renegotiate the country’s EU membership.
The party manifesto of 2015 says:
We took Britain out of Eurozone bailouts, including for Greece—the first ever return of powers from Brussels.
Cameron had tried his best to prevent Juncker from being appointed as the president of the European Commission.
Osborne recently informed his counterparts that the plan could be out-voted. According to a source in the Treasury:
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. The idea that British taxpayers’ money is going to be on the line in this latest Greek deal is a non-starter.
Greek Prime Minister Alexis Tsipras agreed to the demands of Germany that Greece should agree to an austerity package if it wants bailout loans of €86 billion, which will be paid from a rescue fund called European Stability Mechanism (ESM), created in October 2012 by Eurozone states.
Till this fund becomes available, Greece will have to get €12 billion to save itself from economic collapse. On Monday, it has to repay €4.2 billion to the European Central Bank.
Juncker therefore wants to revive a loan facility called European Financial Stabilization Mechanism (EFSM), which was used to save Portugal and Ireland from similar situations. To make this facility work, funds have to be borrowed from international markets with the EU budget as collateral.
Commenting on the UK deal, an EU official stated:
The council decision is a political agreement, and it can be argued that it does not prevent the activation of mechanism.
