16 Jul 2015

Osborne claims victory over euro fund row

George Osborne is claiming Victory in Europe Thursday, or something like that.

The Treasury says it’s secured a deal that stops the European Commission exposing the UK to potential future costs if Greece defaults on a new bridging loan.

Britain's Chancellor of the Exchequer Osborne is greeted by Luxembourg's PM Juncker during a meeting in Luxembourg

The Commission has been determined to use the loan guarantees set up back in 2010 to help with Portugal and others then seen as on the danger list.

There’s about 7-8bn euros of loan guarantees left in the EFSM fund, and contributors are technically liable for their share of the fund scaled to their overall contribution to the EU.

That means the UK is responsible for 14 per cent of the fund (£750m).

The Treasury is tonight boasting that its got an impregnable ring-fence round Britain now and that the ring-fence applies to all other countries that are not in the Eurozone too – the “outs” as they are called.

The money that backs up the guarantees sits in another fund – the Security and Markets Programme, a piggy bank of bond-buying profits from previous sprees on the debt market.

Not surprisingly, George Osborne is claiming this as a great omen of Britain’s negotiating clout and skill. Others will say the very fact that the commission tried to use the old moth-balled 2010 fund proves that agreements count for little.

The “better off out” backers will also claim that the UK should never have let the EU use the fund even though the government says all exposure for the UK (and others) has been removed.

Tonight, George Osborne has issued a statement saying he’s secured an “agreement that establishes an important principle in law,”

This is all about a fund which was negotiated the weekend after the 2010 General Election when Alistair Darling was still in office but the Coalition was being negotiated back in London.

There was, way back in 2010, controversy about who said what and when, on the founding of the fund.

Here, for aficionados, is the full Treasury transcript summary from the civil servants listening in on the conversation that happened that weekend between Alistair Darling (in Brussels) and the would-be in-coming Chancellor, George Osborne (in London).

Treasury transcript of 2010 negotiations


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