GEORGE Osborne warned the eurozone yesterday that UK cash must not be used to prop up the Greek bailout when he arrived for a meeting in Brussels with European Union counterparts.
The Chancellor said the idea that British taxpayers are going to be on the line for the deal is a “complete non-starter” and told the single currency union it must “foot its own bill”.
Mr Osborne held a series of telephone conversations with other finance ministers ahead of yesterday’s meeting in an attempt to fend off any move by the EU to use hundreds of millions of pounds in the latest effort to rescue the Greek economy from collapse.
The Chancellor said: “It’s in the interests of economic stability across Europe that this Greek deal is now signed and sealed.
“But let me be very clear. Britain is not in the euro, so the idea that British taxpayers are going to be on the line for this Greek deal is a complete non-starter. The eurozone needs to foot its own bill.” Prime Minister David Cameron declared in 2010 that he had won a “clear and unanimous agreement” that an EU-wide emergency fund would no longer be used to underwrite bailouts of struggling eurozone countries.
Instead, responsibility was supposed to fall only on member states using the single currency under a new permanent mechanism specifically set up to deal with crises like that in Greece.
But the deal was not legally binding and European Commission president Jean-Claude Juncker is reported to be seeking to turn back to the European Financial Stabilisation Mechanism (EFSM) to help provide Athens with desperately needed cash while a new bailout is agreed.
Using the EU budget - of which the UK pays around 14% - to secure 8.6 billion euros (£6.1 billion) in loans to Athens could expose the Treasury to £850 million of liabilities in the event of a default, according to a report in a newspaper.
Mr Osborne would not be able to unilaterally veto such a move and must rely on the support of sufficient other member states to block it under a system of voting weighted according to relative size.
Treaties allow money to be raised to help an EU member state “seriously threatened with difficulties caused by natural disasters or exceptional occurrences beyond its control”.
It was never envisaged for economic crises needing bailouts but was invoked to cope with the Greek and Irish economic collapses, with the UK in the role of guarantor of the loans to the tune of billions of pounds.
In December 2010, Mr Cameron, with the support of France, Germany, Portugal, Spain and Sweden, secured a declaration that the mechanism “need not and should not be used for financial bailouts”.
Downing Street accepted at the time that it was not legally binding, but the PM told the Commons it was stated “in black and white the clear and unanimous agreement that from 2013 Britain will not be dragged into bailing out the eurozone”.
Meanwhile Alex Salmond, the SNP’s foreign affairs spokesman, said the Government should have shown more “solidarity” with Greece and not discouraged holidaymakers from travelling to the stricken country.
He said that this had undermined the thriving holiday trade between Britain and Greece, warning the UK would “reap a bitter harvest” from its failure to support the country.