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Greece crisis: Osborne seeks to block use of British-backed fund in bailout Greece crisis: Osborne seeks to block use of British-backed fund in bailout
(about 4 hours later)
George Osborne has made it clear he will seek to block any move by the European Union to draw on an emergency fund containing British money for the new bailout programme for Greece. David Cameron has ruled out British taxpayers providing any funding for a Greek bailout, despite speculation the UK could be asked to contribute as much as £1bn towards the bill.
Arriving in Brussels for a meeting of European finance ministers, Osborne said: “Britain is not in the euro, so the idea that British taxpayers will be on the line for this Greek deal is a complete non-starter. The prime minister’s official spokeswoman said on Tuesday that Cameron did not believe that UK cash should be on the line, and there was currently no proposal on the table for this to happen.
“The eurozone needs to foot its own bill.” George Osborne, the chancellor, said earlier that he would block any EU move to draw on an emergency fund containing British money for the new bailout programme.
The chancellor held a series of telephone conversations with his counterparts ahead of today’s meeting to underline Britain’s opposition to participating in a bailout. Arriving in Brussels for a meeting of European finance ministers, Osborne said: “Britain is not in the euro, so the idea that British taxpayers will be on the line for this Greek deal is a complete non-starter. The eurozone needs to foot its own bill.”
Eurozone leaders on Monday 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. There were reports on Monday that the European commission president, Jean-Claude Juncker, proposed to revive the European Financial Stabilisation Mechanism (EFSM) to use as collateral against short-term loans to Greece.
Britain believes this would renege on an agreement that the EFSM, which involves all 28 EU members, would no longer be used to underwrite bailouts of eurozone countries, which instead would be the responsibility of the 19 members of the single currency.
Cameron’s spokeswoman said the prime minister completely shared Osborne’s view that it would be unacceptable.
“We’ve been clear we do not think British taxpayers should be providing funding for the eurozone,” she said. “We should be clear that there is no proposal on the table.”
Eurozone leaders struck a deal on Monday to prevent Greece from leaving the euro in return for a pledge from Athens to enact major reforms in the coming days.
The Greek prime minister, Alexis Tsipras, vowed on Monday evening to secure parliamentary approval after accepting a third bailout programme that came at the end of exhaustive talks with EU leaders.
Britain, however, has been alarmed about the possibility of having to participate, leading the chancellor to hold a series of telephone conversations with his counterparts ahead of Tuesday’s meeting to emphasise his opposition.
Related: Alexis Tsipras aims to steer eurozone bailout plan through Greek parliamentRelated: Alexis Tsipras aims to steer eurozone bailout plan through Greek parliament
In 2010, the prime minister, David Cameron, pushed for 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, which instead would in future be the responsibility of the 19 members of the single currency. In the House of Commons, Alex Salmond, the SNP’s foreign affairs spokesman, said the UK would “reap a bitter harvest” from its failure to support Greece, claiming holidaymakers were being discouraged from visiting the country.
However, there were reports on Monday that the European commission president, Jean-Claude Juncker, proposed to revive the EFSM fund to use as collateral against short-term loans to Greece. “Shouldn’t the government have shown a bit more solidarity with the people of Greece over recent weeks? For many of us, the attitude of the European commission, the ECB, certain European leaders, has been arrogant, dismissive and even anti-democratic,” he said.
Downing Street said Cameron believed the original agreement stood and the fund would not be used again. “But all this government seems to have done is discourage tourists from going to Greece.”
“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.” David Lidington, the foreign office minister, rejected Salmond’s criticism and said Britain had offered to help Greece.
On Monday night, Alexis Tsipras vowed to secure Greek parliamentary approval after accepting a third bailout programme that came at the end of exhaustive talks with EU leaders. “I don’t know if you were here when the chancellor made his statement on Greece last week, but the chancellor made very clear the sympathy and long-standing friendship between this country and the people of of Greece,” he said.
The Greek prime minister and his Syriza party have been accused of capitulating to austerity demands that were rejected in a referendum just a week before. “When this government was elected in May this year, the prime minister made an offer to the Greek government of technical support for things like improving the efficacy of their taxation system, that offer still remains open.”
Tsipras, following fraught negotiations with EU leaders in Brussels until Monday morning, indicated that he would carry the package through the Athens parliament, despite some defections, in a vote by Wednesday. Athens faces demands to repay €7bn in debts in July, including €3.5bn due to the European Central Bank on 20 July.This will require a bridging loan of as much as £12bn, because the full bailout will not be agreed in time. All of the other 27 EU nations are expected to be asked to contribute.
Athens faces demands to repay €7bn of debts in July, including €3.5bn due to the European Central Bank on 20 July.This will require a bridging loan of £10bn-£12bn, as the full bailout will not be agreed in time. All of the other 27 EU nations are expected to be asked to contribute. Some of the controversial reforms Greece promised to pass into law by Wednesday include an overhaul of the country’s VAT and pensions systems and signing up to plans that ensure immediate spending cuts in the event of breaching creditor-mandated budget targets.
Controversial reforms Greece promised to pass into law by Wednesday include reforming the VAT system, overhauling pensions and signing up to plans that ensure immediate spending cuts in the event of breaching creditor-mandated budget targets. The level of hostility engendered by the accord ensures that Greece is likely to be plunged into prolonged political tumult.
Athens has agreed to sell off state assets worth €50bn, with the proceeds earmarked for a trust fund supervised by its creditors. Half the fund will be used to recapitalise Greek banks, while the remaining €25bn will pay down Greek debts as well as be investmented. The Greek labour minister, Panos Skourletis, said Europe was “punishing us … we can’t make this agreement seem better than it is.” He predicted that fresh elections would almost certainly have to be held later in 2015.
Determined to keep his party together ahead of an expected onslaught by MPs opposing the outlined deal, Tsipras summoned his closest allies to a meeting in Athens before a gathering of his parliamentary party on Tuesday. Paul Krugman, the Nobel prize-winning economist and prominent critic of austerity in Greece, said the creditors’ demands “went beyond harsh into pure vindictiveness, complete destruction of national sovereignty [with] no hope of relief.
The former Greek finance minister, Yanis Varoufakis, has called the deal “unviable” and likened it to the 1919 Versailles treaty – widely seen as the harbinger of the second world war for its crushing of Weimar Germany.
“This has nothing to do with economics. It has nothing to do with putting Greece back on the rails towards recovery,” Varoufakis told Australia’s public broadcaster, the ABC.
“This is a new Versailles treaty that is haunting Europe again, and the prime minister [Alexis Tsipras] knows it. He knows he’s damned if he does and he’s damned if he doesn’t.”
The leader of Tsipras’s coalition partner, the populist Independent Greeks, said he could not support a key element of the proposals that he described as “barbaric”.
Panos Kammenos said a demand that Athens hands over €50bn in assets from privatisations as collateral for fresh loans was a form of “confiscation” and “we cannot agree to that”.
The level of hostility engendered by the accord ensures that Greece is likely to be plunged into prolonged political tumult. With foreign lenders demanding almost total surrender of the nation’s fiscal sovereignty, leading Syriza cadres spoke of the deal as the product of defeat and capitulation.
“Europe is punishing us … we can’t make this agreement seem better than it is,” snapped labour minister Panos Skourletis, predicting that fresh elections would almost certainly have to be held later in 2015.
Paul Krugman, the Nobel prize-winning economist and prominent critic of austerity in Greece, said the creditors’ demands on Greece “went beyond harsh into pure vindictiveness, [leading to the] complete destruction of national sovereignty [with] no hope of relief.
“It’s a grotesque betrayal of everything the European project was supposed to stand for,” he wrote several hours before the final deal emerged.“It’s a grotesque betrayal of everything the European project was supposed to stand for,” he wrote several hours before the final deal emerged.
Agence France-Presse contributed to this reportAgence France-Presse contributed to this report