Sunday

21st Apr 2019

Greece wants EU to use old Latvia fund for bail-out

Greek leader George Papandreou and Socialist parties across Europe have called on the EU to re-deploy for Greece an existing European bail-out fund originally established to rescue Latvia, Hungary and Romania.

The Party of European Socialists, representing social-democrats from the continent, issued the fresh bail-out proposal at a meeting in Brussels on Thursday (25 March).

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  • European Socialists have rallied behind Greece (Photo: John D. Carnessiotis, Athens, Greece)

The scheme involves tweaking the rules on use of a €50 billion pool of cash set up in 2008 at the height of the economic crisis and intended to help non-eurozone EU countries.

Under the fund, termed the "Balance of Payments Assistance" mechanism, the European Commission borrows money on bond markets at lower rates than the individual countries are able to. This cash is then leant on to the recipient countries.

Mr Papandreou said he would put the proposal "on the table" at the two-day EU spring summit, which also began in the EU capital on Thursday.

"It's a clear and simple solution. It shows that where there's a will, there's a way," he said.

The Danish chief of the PES, Poul Nyrup Rasmussen, said that no EU treaty change would be needed, with the existing EU agreement forbidding a bail-out of a euro-area country by its peers.

All that is needed to use the community facility is to alter its guidelines so that eurozone and non-eurozone countries can equally benefit from the fund.

"I can tell all German taxpayers, this will not cost you one euro," he said, amid popular resentment in Germany at the thought of Berlin shifting money from its budget to help Greece.

The Dane also took a swipe at Germany's leader, Angela Merkel, who has until recently ruled out a eurozone bail-out of Greece:

"This [the community facility solution] could have been realised earlier, but because of Berlin, we have lost two months."

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After being one of the first EU countries in need for a bail-out in 2008, Latvia is slowly recovering and aiming to join the eurozone on 1 January 2014, the country's newly elected president told this website.

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