NEWS

Europeans clash over Greece cash crunch options

europeans-clash-over-greece-cash-crunch-options

European governments clashed over options to help Greece meet its short-term cash needs while it waits for a eurozone bailout deal to be finalised, officials said on Tuesday.

Britain, which does not use the euro, has already said it will resist contributing to any bridge financing to get Greece through several huge debt repayments while details are settled after Monday's hard-won agreement.

"I can confirm that concerns were raised by several non-euro member states, this is something we will have to take into account," said Valdis Dombrovskis, the EUs Vice-President for the euro after a meeting with European finance ministers.

"Pretty much all options are quite difficult and have political, legal and financial complications," the former Latvian premier said.

Bilateral loans are another option that have been raised, but like the others that would pose difficulties, ministers said.

Finnish Finance Minister Alexander Stubb said it would be "difficult for any member states putting fresh money without conditionality."

Greek Prime Minister Alexis Tsipras struck an 85 billion euro bailout deal with his eurozone partners on Monday that involves painful reforms and a parliamentary vote by Wednesday on key austerity measures.

But the deal will take at least four weeks to finalise and implement, and Greece's creditors estimate Athens needs 12 billion euros to get through mid-August.

Next Monday Greece owes the European Central Bank 4.2 billion euros and a default would force the ECB to cut off emergency loans keeping Athens banks afloat.

Greece already on Monday missed a second debt payment to the International Monetary Fund in two weeks, bringing the country's arrears to the IMF to 2.0 billion euros, an unprecedented embarrassment for a developed nation.

British Finance Minister George Osborne reiterated that he would refuse any attempt to use EU rescue cash to bridge the financing gap.

"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," Osborne said in Brussels.

Britain believes that the European bloc in 2010 agreed to no longer tap an EU-wide emergency fund, the European Financial Stabilisation Mechanism (EFSM), to underwrite bailouts of eurozone countries.

Reports said that France as well as the European Commission were pushing to turn to the fund and would only require a weighted majority of member states to do so.

An EU source said that using the EFSM remained one of the "most feasible options" to help Greece survive the cash crunch and urged Britain to give ground on the issue.

In another option that would certainly prove to be controversial, German Finance Minister Wolfgang Schaueble proposed that Greece issue IOUs to pay pensions and other domestic bills, thereby saving its scarce euros for debt payments.
0
But the creation of IOUs is also seen as a first step towards the return of the Greek drachma, and risks rekindling talk of Grexit that Monday's bailout deal was supposed to have buried.

Other options include transferring 3.5 billion euros in profits on Greek bonds held by the ECB.

[AFP]l