Monday

20th Sep 2021

Member states deny plans for Greek bailout

Officials from France and Germany have denied claims in an article published by French daily Le Monde on Thursday (28 January), which said a number of EU member states are exploring a financial support mechanism to help Greece tackle its deficit crisis.

The news comes after yield spreads between 10-year Greek bonds and benchmark German Bunds widened dramatically on Wednesday, sparked by Greek government denials it had mandated US investment bank Goldman Sachs to sell debt to China.

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  • Greek stocks have also been hit by market concerns over the country's public finances (Photo: Charles P)

A French finance ministry official said EU countries had no plans to bail out Greece or make bilateral loans to the embattled country, reports Dow Jones.

Germany also rejected the claims. "There is absolutely nothing to these rumors," German finance ministry spokeswoman Jeanette Schwamberger said in a statement from Berlin, reports Bloomberg. "They are without any foundation."

But despite the denials, EU and member state officials are widely considered to be looking into a means of transferring financial support to Greece, in a bid to prevent a potential government debt default and knock-on negative effects for other EU states.

The Le Monde article suggested any financial aid would be conditional upon the Greek government introducing new measures to clean up the country's public finances.

European Commission economy spokeswoman Amelia Torres refused to comment on the speculation at a news conference in Brussels, saying the commission would shortly issue its opinion on Greek plans to bring its deficit into line with EU rules.

Eurobonds

Struggling non-eurozone countries can apply to the EU's balance-of-payments assistance facility for support, the ceiling of which was raised last year, but no similar mechanism currently exists to help euro area members.

The idea of a common bond for the currency bloc periodically raises its head as a potential solution. This would be likely to lower borrowing costs for weaker members, but marginally raise costs for members with stronger public finances, giving rise to German opposition in the past.

On Thursday, European Parliament Socialist group leader Martin Schulz called on the commission to bring forward urgent proposals for the launch of Eurobonds in order to deal with the Greek situation.

"It is unacceptable that the European Union is not showing more solidarity with Greece. The EU is about partnership and mutual support," he said.

"My political group has called for the launch of Eurobonds. We believe that this measure would help Greece and other member states in their current difficulties. We now repeat our call and ask the European Commission to come forward with urgent proposals," he added.

Parliament's Liberal leader Guy Verhofstadt also recently called for Eurobonds to be considered.

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