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 (£4.9bn) pan-EU fund called the European Financial Stability Mechanism (EFSM) would be the most viable option to fund a short-term loan to Greece. However, its use has angered EU members that do not use the euro.
It especially annoyed Osborne, as the UK was promised in 2010 that the EFSM would not be used for Eurozone bailouts, leading him to initially say the UK would not contribute. 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 has made from 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.”
The guarantee on the UK’s cash will help to smooth over UK-EU relations as Osborne gears up to renegotiate Britain’s EU membership terms.
‘This agreement establishes an important principle in EU law: that the responsibilities of the Eurozone countries and those members of the EU, like Britain, who are not part of the single currency and do not want to be, are very different,” Osborne said.
“This is a principle we want and expect to be acknowledged when we renegotiate a new relationship with the EU before allowing the British people a say in an in-out referendum on our membership.”