Cyprus-Forum.com

[Svetlana]

'This will outrage British taxpayers': Deal to rescue Greece to soak up millions

Greece was last night handed a generous national bailout by its euro partners which will end up costing British taxpayers more than £600million a year.

In a move aimed at shoring up dwindling confidence in the stricken country, the 16 eurozone members announced they would lend 30billion euros this year alone.
Germany and France agreed that Athens should receive preferential cut-price loans to stave off a financial crisis.


Intervention: The eurozone had little choice but to cobble together a compromise deal to pull troubled Greece back from the abyss
But another cash injection from the International Monetary Fund means Britain will have to pay part of a further £13billion bill to prop up Greece in the money markets.
Because the UK contributes 5 per cent of the IMF annual budget, this would equate to a £650million bill for the taxpayer.
Mats Persson, research director of Open Europe - an independent think-tank that promotes reform of the EU - said: 'This move will take Europe into uncharted territory and no doubt cause outrage amongst British taxpayers.
'Britain didn't want to be in the eurozone for this very reason as it is now paying for the economic mistakes of another government. This should be a eurozone problem, but I guess it is seen in Britain's interests economically for Greece not to go bankrupt.'
The eurozone yesterday had little choice but to cobble together a compromise deal to pull troubled Greece back from the abyss.
Billionaire currency speculator George Soros had earlier warned that the eurozone faced 'disintegration' unless Germany guaranteed a multi-billion euro bail-out. Until yesterday, Berlin had strongly resisted a deal.
According to the tycoon, who 'broke the Bank of England' in 1992, the 11-year-old single currency would topple if Greece were allowed to renege on its £260billion debt mountain.
Mr Soros said: 'The damage that break up would cause is so great that people will realise it, they will pull back from the brink.
'Is there the political will to keep Europe together? If there's not, I think there will be a process of disintegration.'
Under last night's arrangement, eurozone members will lend to Greece at a discounted rate of 5 per cent if it cannot borrow money on international markets.
Following the recent plunge in the price of its debt, Greece's borrowing rate soared to above 7 per cent.
The emergency deal could see Greece receive tens of billions of pounds more in loans over the next three years from the eurozone countries and the IMF. Currently, it has to find £10billion by May to avoid defaulting on its loans.
Although Athens last night insisted it did not need to turn to its partners, experts believe it is only a matter of time before it taps the emergency fund.
The value of Greek debt suffered a record plunge last week, driving up the price of borrowing money and leaving it in acute danger of being frozen out by international investors entirely.
Adding to the febrile mood were reports that depositors are withdrawing their savings from Greek banks and moving them offshore.
Critics like Soros, who made more than £650million nearly 20 years ago when the pound was ejected from the Exchange Rate Mechanism on Black Wednesday in 1992, have long argued that the structure of the single currency is flawed.
Without sweeping powers over taxation and spending, the eurozone will always be susceptible to financial turbulence in individual states, critics say.
But closer political union would go down badly in countries such as Germany, which pride themselves on their fiscal rectitude.
German Chancellor Angela Merkel has repeatedly questioned why her voters should be forced to bail out a profligate Greek government that spent years hiding the true extent of its borrowings.
Even though the proposed emergency loans are more competitive than Greece could achieve on international money markets, it will still be paying more to borrow than many of its eurozone partners.
Some experts believe this mismatch could leave Athens mired in a continued fiscal crisis.
In a joint statement last night, the eurozone countries said: 'The Eurogroup is confident that the determined efforts of the Greek authorities and its eurozone partners will allow it to overcome the fiscal and structural challenges of the Greek economy.'
However, many experts warned the Greek budgetary crisis has thrown an unforgiving light on other single currency nations labouring under massive debt burdens.
Spain, Portugal and Ireland are mired in deep recessions and, like Greece, are having to borrow heavily to pay for essential services like health and education.
Fears that the crisis would spread to other member countries led to heavy selling of the euro.