European Union tramples over British opposition to Greek rescue plan

[magical thyme]

Source: The Telegraph

The European Commission has ignored David Cameron's objections to using British taxpayer money to keep Greece from going bankrupt over the summer.

Brussels announced today that it would press ahead with plans to use a moribund EU-wide rescue fund - the European Financial Stabilisation Mechanism - to provide a €7bn emergency loan to Greece.

The plans are set to force the Government in to an embarrassing climbdown, riding roughshod over a “black and white” agreement the Prime Minister had brokered with fellow EU leaders promising the money would never be used to rescue a eurozone economy.

Should the EFSM loan go ahead, the Treasury will be exposed to around €690m of risk in order to help Greece avoid bankruptcy until the end of July.


Read more: http://www.telegraph.co.uk/finance/economics/11741422/European-Union-tramples-over-British-opposition-to-Greek-rescue-plan.html

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Whoa. When the Euro Zone goes down, will it drag the European Union with it?

The UK is not a member of the Euro Zone, and never will be. How can they be forced to bail out a Euro Zone disaster? The PIIGS catastrophe is the very reason the UK chose not to enter the EZ...

[roamer65]

1. The EU just handed Nigel Farage the "no" vote he wants on a British EU referendum.

This will tick off the Brits pretty well and just in time for the referendum on EU membership that Cameron promised.

[Igel]

2. Because the fund isn't the Eurozone Financial Stabilization Mechanism.

It's a split sort of thing, the Internet tells me. I suspect it's like an onion and under my superficial understanding there are other layers, but here's what I think I got.

The EFSM is for securing European stability and was established to help EU member countries. It relies on funding from outside bond issues with the EU budget as collateral and is under the control of the EU Commission. It's not a Eurozone entity in that regard.

But the EFSM only loans to Eurozone countries, and so it sounds like the non-Eurozone countries are in a lopsided relationship, supporting the EFSM but without access to help from the EFSM, and that all by itself sounds quite scurvy. Right along side of the EFSM, however, there appears to be a separate mechanism for non-Eurozone EU countries that relies upon the exact same EU budget as collateral, and some of those countries have also gotten bailouts. I have to wonder if it's not because the Eurozone apparatus is just convenient and established so it's an easier channel to let the loans flow through.

Either way, it's the "with the EU budget as collateral" that's at issue, and that as the ultimate funding source is available to any EU country. And that puts Britain and every other EU country on the hook to the extent they fund the EU (it's not exactly an equal distribution). That the Commission is acting as a Eurozone commission and not as an EU commission, I think, may be incidental. Both mechanisms are there to help EU countries' financial stability, and if there's an EU country that's teetering, it's Greece.