Prime minister declares Britain will take no part in any future EU bailout of Greece even though he has no veto
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David Cameron said at his Downing Street press conference that Britain would take no part in any second EU bailout of Greece. Photograph: Peter Macdiarmid/Getty Images
Why is David Cameron so confident that Britain will not have to take part in any EU element of a second bailout of Greece?
Prime ministers need to be on firm ground if they are to declare three days before a European summit, as Cameron did at his press conference this morning, that a red line will not be crossed. They need to have extraordinary confidence to make such a declaration when Britain has no national veto in the matter under consideration.
But that is exactly what the prime minister did when he said that Britain would not be joining any second EU bailout of Greece. Britain would stump up, he said, but only as part of its IMF obligations:
The point about Greece that the chancellor and I have both made is that we were not involved in the first bailout of Greece, we don't believe the European Financial Mechanism should be used in any way for a number of reasons. First of all we weren't involved in the initial bailout, we shouldn't be involved in subsequent bailouts. Second of all this has been discussed at a eurozone level, not at the level of the 27. So it would be quite wrong now to bring Britain into this bailout.
Of course we have a role as a member of the IMF, of course we wish the Greek government well but I don't want to see the European Financial Mechanism involved in bailing out Greece because I don't think Britain should be participating in that bailout.
These are strong words when you consider that Britain has no veto over the use of the European Financial Stability Mechanism (EFSM) which is funded through the EU budget. This means that all 27 EU member states are liable for the mechanism which was created (and whose use) is decided through Qualified Majority Voting (QMV).
My colleague Patrick Wintour reported in Tuesday's Guardian that the mechanism, which was originally worth €60bn, is now worth around €37.5bn after it was used to fund the bailouts of Ireland and Portugal. This presents a potential British liability of £5.5bn.
So how can Cameron be so confident Britain will not have to cough up through the EFSM? Raw EU politics is the most likely explanation.
Angela Merkel, the German chancellor, insisted that the temporary bailout procedures, agreed in May last year, would have to be put on a permanent, legally binding, basis from 2013. This meant a minor treaty change. At this point Britain had a veto.
It is pretty clear what happened. The prime minister said to Merkel that Britain would accept a treaty change – quite a move for a Tory leader who faced intense criticism on the right after he abandoned a referendum on the Lisbon treaty. But this clearly came at a price: no British involvement in any further EU bailout of Greece and severe restrictions on British involvement in bailouts of other countries.
For the moment a future Greek bailout is likely be funded in three ways:
• A €440bn fund from the 16 countries of the eurozone, underwritten by national guarantees from the 16 governments. This is the largest part of the €750bn bailout fund agreed in May last year "when the Greek debt crisis escalated into a euro survival test", as my colleague Ian Traynor wrote. The EFSM was the other key element.
• IMF guarantees.
• Bilateral loans. These were at the heart of the first Greek bailout agreed before the temporary EU system was agreed in May 2010.