Chancellor George Osborne has managed to secure a guarantee on £700m of British funds that will be loaned to Greece while it continues to negotiate its bailout.
Earlier this week Eurozone officials decided that tapping into a €7bn pan-EU fund called the European Financial Stability Mechanism (EFSM) would be the most viable option. However, its use has angered EU members that do not use the euro.
It especially angered Osborne after the UK was promised in 2010 the EFSM would not be used for Eurozone bailouts, leading him to initially state the UK would not contribute to this. However he later backtracked, on the proviso taxpayers' cash was "not on the line".
But now a deal has been struck guaranteeing British taxpayers’ money in case Greece does not repay the loan. The money will be backed by profits that the European Central Bank (ECB) has made from holding Greek government bonds.
“These have been tough talks, but the agreement announced this evening means an impregnable ring-fence around British taxpayers’ money, which will not be at risk in any way in this emergency financing for Greece,” Osborne said.
“Importantly, we have also managed to secure the same protections for all other member states who are not members of the single currency. The European Commission has agreed these changes will be legally binding.”
Greece is currently negotiating the terms of its third bailout plan since 2010, but will run out of cash unless it gets a short-term “bridging” loan.