Dangerous and expensive farce – the Greek loan go round

The Euro members of the EU will lend Euro 7bn to Greece via the EFSM (technically an EU not a Euro area fund)  so Greece can repay the ECB and the IMF what it owes them, prior to agreeing new loans from them! We are told the non Euro members of the EU will not carry any of the risk, so why use an EU rather than a Euro area fund?

Meanwhile the ECB which says it wants Euro 4.2 bn back on Monday from a previous loan will lend an extra Euro 900 million to Greek banks in the next few days and will doubtless be expected to lend considerably more thereafter.

Why this absurd money go round?  Why don’t the creditors delay repayments for a  period whilst they are negotiating the new longer term loans?  What’s the point of a bridging loan from them to repay themselves?



  1. an wragg
    July 16, 2015

    Let them carry on John. They are a very effective recruiting sergeant for the OUT campaign.
    I think Junker should be signed up by BOO

    1. Narrow Shoulders
      July 17, 2015

      Mr Osborne claims to have ring fenced the non EZ countries.

      Mr Redwood if 7 billion Euros has been removed from an 11 billion Euro fund designed to protect the EU area, which countries will be topping up that fund? All EU countries? In which case UK will be paying in more or EZ countries? In which case we may be ring fenced.

  2. Boudicca
    July 16, 2015

    So Peter can pretend to pay Paul. Paul can pretend to have been paid ….. and they can both pat themselves on the back and pretend that everything is hunky-dory in Euroland.

    When it fact, it is causing an economic catastrophe.

    Cameron’s regular bragging about negotiating a British opt-out from propping up the Euro via the EFSM has been shown up for the load of hogwash we all knew it was.

    The EU will do it anyway and Cameron/Osborne simply tug their forelocks and comply.

    Pathetic. We have a Government of cowardly, appeasing, utterly spineless idiots.

    1. Robert Eve
      July 16, 2015

      Spot on.

      1. Hope
        July 16, 2015

        No, I think it is far worse. They made their claims in parliament and to the public on many occasions. Osborne should resign. The treasury is still trying to spin to protect Osborne from embarrassment. The fact is it is an EU wide fund and is still being reported that all 28 countries will be involved in stark contrast to what the duo told the UK public. We were categorically told Cameron had made a deal, ridiculed Brown at PMQs and bragged how he got us out of any bailout to Eurozone countries. No such thing exists as it is not legally enforceable. He and his advisors must have known, if they did not know their incompetence should be reason in itself to resign. They must walk. It certainly should not leave anyone in any doubt that Cameorn is not fit to negotiate anything on behalf of the courtry.

        The day before Osborne attended his meeting, with other finances ministers, the same unequivocal talk and silence on leaving. They are not up to the job of government or looking after the country’s interests. This includes our safety, border controls and security of energy.

        1. Atlas
          July 17, 2015

          Agreed. The silence from our Political-to-his-fingertips Chancellor is deafening. Completely out-witted describes it.

          As for Cameron’s election boast – well that proved to be as cast-iron as his Lisbon promise. As Boudicca says, “spineless”.

    2. Timactiont
      July 16, 2015

      Exactly. My guess is the Treaties don’t allow a haircut of the loans that the IMF have stated must happen to be sustainable. This alleged solution is desperate effort to kick the can down the road and hoodwink German and other Eurozone taxpayers how much they will have to give up at some point. We already know the stupidity of our useless legacy party leaders. Almost a blackout on the msm. We are living in a dictatorship.

    3. Richard1
      July 16, 2015

      What has the Greek loan go round described above to do with the British govt?

    4. oldtimer
      July 17, 2015

      It is more smoke and mirrors, calculated to confuse and disguise.

  3. Margaret Brandreth-J
    July 16, 2015

    I wouldn’t be surprised if the crack was the ECB and IMF get their money back and then the Greeks made to work considerably harder than they are doing now .The controllers or those who think they are in control then take half of the living wage and pocket it , because they are arrogant enough to state that they are in control. Now this sees familiar ..Oh yes its the thought police again.

  4. Denis Cooper
    July 16, 2015

    “We are told the non Euro members of the EU will not carry any of the risk, so why use an EU rather than a Euro area fund?”

    Because the EFSM is there and it can be used immediately, just with approval by EU finance ministers through a decision made by qualified majority voting with none of them having a veto, and notwithstanding the previous worthless political agreement that it would not be used again so that UK could be graciously excused from participating in any more illegal eurozone bailouts, while the preferred and more legally sound bailout mechanism which involves only the eurozone states, the ESM, can only disburse the additional bailout funds which are required after the finance ministers have been put to the bother of getting parliamentary approval back home in most if not all cases.

    1. Narrow Shoulders
      July 17, 2015

      Isn’t it wonderful to have a seat at the top table?

      Three million jobs and removal of data roaming charges anyone?

    2. a-tracy
      July 17, 2015

      ‘Qualified Majority Voting’ should be the number one reason for the Out campaign, its a like putting all of the UK’s none working claimants in charge of UK taxation.

  5. acorn
    July 16, 2015

    ECB president Mario Draghi said the bank had offered more help through Emergency Liquidity Assistance (ELA) following a request from the Bank of Greece.

    Denis C will tell you, that under the Treaties, the ECB doesn’t have any options. It is obliged to provide ELA (emergency liquidity assistance; cash, as we know it) if requested. The Bank of Greece would have a good case to sue the ECB, if it failed to do so.

    This would all be a big laugh until you remember the millions who have been forced into penury by this idiotic austerity religion of the Euro-neo-liberals. Come the revolution, there will not be enough rope and lamposts to accommodate the guilty.

  6. JJE
    July 16, 2015

    This whole saga is bringing the Left in this country round to the No side in a referendum. It’s pretty difficult for anyone who spends five minutes thinking about this mess to come to a different conclusion.
    Try to welcome them as prodigal lost sheep and not say we told them so!

    1. Hope
      July 16, 2015

      Excellent article by Ambrose Evans Pritchard in the DT. Cameronand Osborne ought to read it to help their understanding. Clearly both are out of their depth.

    2. petermartin2001
      July 17, 2015

      You’re right about the left!

      I’m not sure if I’m typical, but having opposed EEC/Common Market membership from a leftish standpoint in my youth, I gradually moved into the pro camp . I actually voted for the Lib Dems (tactically) in 1997, and stayed there up until about the time of the Greek so-called “2012 bail out” . It was pretty obvious, then, that the bail-out was a bail-out of the German banks at Greece’s expense.

      Further research into the workings of the euro, particularly the rules of the so-called Stability and Growth Pact was a real eye opener for the reasons I’ve tried to explain previously on this blog.

      The progressive left, as distinct from the ultra left, are in a state of shock over Greece such that they have little or nothing to say on the matter. See the Labour websites, like Labourlist, on that. The EU is turning out to be not the EU that they thought it was. Their confidence in the EU has been shaken.

      It just needs to be shaken some more and many will join the No campaign – providing it isn’t seen as exclusively run by UKIP and the Tory Right.

  7. Denis Cooper
    July 16, 2015

    Cameron replying to Bill Cash in the Commons on December 20th 2010, from Column 1193 onwards:


    “Mr William Cash (Stone) (Con): I am extremely grateful, Mr Speaker. I really only came here to wish the Prime Minister a happy Christmas. Does the Prime Minister share the concern of many of us that the present financial mechanism is unlawful, and that Britain is exposed until 2013 while the black hole of Portugal and Spain opens up before us? Does he therefore think there are serious grounds for challenging the unlawfulness of it and not exposing the British electorate to the prospect of having to contribute to that while suffering such severe austerity cuts?

    The Prime Minister: I thank you, Mr Speaker, for your leniency. No European statement would be complete without a question from my hon. Friend the Member for Stone (Mr Cash). He may have a good point. Article 122 of the treaty refers to help in the case of natural disasters and other emergencies. There are some people who question whether it should have been used in this way to support eurozone countries.

    That argument was had and was conceded under the previous Government in two ways. First, they agreed the establishment of the mechanism. Secondly, if we go back to the Nice treaty, it was the then Europe Minister, the right hon. Member for Leicester East (Keith Vaz), who is in his place, who argued from the Dispatch Box that it was perfectly okay for article 122 to go to qualified majority voting, which is where we are today. So in two ways the previous Government made a bad mistake. As I say, we are clearing up the mess and we will certainly do that from 2013, but the mechanism remains in place till then.”

    Cameron replying to Mark Reckless in the Commons on October 24th 2011, from Column 36 here:


    “Mark Reckless (Rochester and Strood) (Con): The Prime Minister tells The Daily Telegraph today that we should use any treaty change to shore up the euro to get powers over employment and social policy back, yet on 25 March, he agreed to precisely such a treaty change, but did not ask for anything in return.

    The Prime Minister: I have to take issue with my hon. Friend. The very limited treaty change that is about to be debated in, and hopefully passed by, the House of Commons, gets us out of the bail-out mechanism that the previous Government got us into. I thought, and I still think as Prime Minister, that that was the single most important price that we could exact for that treaty change—that was the biggest concern of the British public. The point I made yesterday and that I will make again today is that I believe that huge changes will take place in the EU and the eurozone. That will give us opportunities to maximise the national interest, which is what we should be talking about and debating in the Conservative party, the coalition and the House of Commons as a whole. We will not further that by having a referendum that includes an in/out option. As I have said, that would be like walking away from a burning house. We should deal with that first, then talk about the future.”

  8. The Prangwizard
    July 16, 2015

    From ‘Guido’

    Conservative Party manifesto, May 2015:

    “We took Britain out of Eurozone bailouts, including for Greece – the first ever return of powers from Brussels.”

    July 2015:

    “Britain will be liable for close to £1 billion of emergency loans to Greece after Jean-Claude Juncker tore up a “black and white” deal to protect UK taxpayers from Eurozone bailouts.”

    I gather Juncker is saying that it was a political agreement and thus not binding. It’s a bit like ‘English Votes….’, all falling apart through your government’s weakness and complacency – outmanoeuvered by opponents every time. And is not as if you weren’t warned. So it must be incompetence, if not a deceit against the people of England.

    1. Timaction
      July 16, 2015

      Not my fault. I knew what the legacies would say but always do. Capitulate with the EU dictatorship!

    2. Hope
      July 16, 2015

      It was a lie. Not legally enforceable as we now know. Cameron needs to apologise and walk.

    3. Denis Cooper
      July 16, 2015

      Well, I have no legal training but I said at the time that this was only a political agreement and in reality it was no more legally enforceable than a party’s election manifesto, so it created no legal bar to the Commission proposing a further use of the EFSM and pushing it through by qualified majority voting. What would have created a legal bar was a treaty change to restore the national veto on Article 122 which was removed through the Nice Treaty, and Cameron could have demanded that as part of a quid pro quo of treaty changes in return for his assent to the EU treaty change that Merkel demanded in the autumn of 2010.

    4. Lifelogic
      July 16, 2015

      A deceit against the people of England seems the most likely.

    5. matthu
      July 16, 2015

      “We took Britain out of Eurozone bailouts, including for Greece – the first ever return of powers from Brussels.”

      And I bet that return of powers will be twice as effective and twice as permanent as any other binding opt out or binding promise that Cameron comes back with in time for the referendum:

      “German border guards will in future be guaranteeing the integrity of our frontier – first ever deployment of German forces on British soil”

      “We will enjoy new rights to sell our Welsh lamb, Scottish beef and Isle of Wight garlic at preferential rates in French farmers’ markets – rubber-stamped by Hollande.”

      “People right across the EU will now be paying the same BBC licence fee – BBC HQ will be moving to Brussels to save money.”

      What are the other promises and opt outs Cameron will be coming back with?

      1. Denis Cooper
        July 17, 2015

        As the eurozone bailouts were illegal there was no power to return!

  9. alan jutson
    July 16, 2015

    Its an old one but perhaps sums up the farce.

    A German tourist visits a hotel in Greece approaches the manager and says I want to look at the best rooms in the hotel to see if they are suitable, and to show his intent he leaves a Euro 100 note at reception.

    As the German leaves reception to inspect the rooms the Hotel manager quickly takes the note and gives it to his Butcher in payment for Meat supplied

    The Butcher then takes the note to the farmer in payment for the animals supplied.

    The Farmer then takes the note to the feed supplier for payment of animal feed.

    The Animal feed owner then takes the note to the Local bar in payment for his daily refreshment so far had on tick.

    The bar owner gives the note to the local prostitute who has been giving her services on credit to the bar owner.

    The prostitute goes back to the hotel and pays her room hire bill.

    By this time the German tourist returns to reception, says sorry the rooms are simply not of a good enough standard for him and his family, takes his Euro 100 note back and marches out.

    The result.

    No one has done any work or produced anything.

    Money has gone around the system at no cost.

    No one has paid any taxes

    All are now out of debt.

    Amazing what you can do if you try, why all this argument about the terms of a bailout.

  10. Chris
    July 16, 2015

    In answer to your question re why the money go round, JR, the creditors make money from it.

    July 16, 2015

    Given the get-outs expressed by the ECB today to such questions they might say such behaviour is mandatory or, quotidian. “Mandatory” brooks no legitimate criticism and ” Quotidian ” requires an access to an on the spot dictionary for many. Good dodges.

    Banking procedures and indeed money sent by governments to this and that often are tied to unravelling one by one the knots in a handkerchief. “The US economy sneezes and the world catches a cold.” There you are. The EU is Little America.

  12. Lifelogic
    July 16, 2015

    Indeed a complete farce but true to EU form. One assumes the reason is to get the non EURO countries on some kind of hook. Doubtless Cameron will meekly go along with it all.

  13. zorro
    July 16, 2015

    As others have intimated…

    ‘Never interrupt your enemy when he is making a mistake.’ or more apt in reference to the EU… ‘Never interfere with the enemy when he is in the process of destroying himself.’ – Napoleon Bonaparte


  14. Denis Cooper
    July 16, 2015

    I don’t think that UK taxpayers’ money will be put seriously at risk through the provision of bridging finance to the Greek government, simply because it will most probably be for a short time at the end of which the Greeks will have fresh bailout funds from the ESM and will be able to repay the EFSM loan.

    However, I read here:


    “A contract will be considered illegal at its formation when it is incapable of performance without an illegal act. Contracts falling into this category cannot be enforced. Where a contract is illegal when formed, neither party will acquire rights under that contract, regardless of whether there was any intention to break the law. The contract will be void and treated as if it was never entered into.”

    From that and reading Article 125 TFEU I conclude that this proposed arrangement under which the UK and other non-euro countries are to be guaranteed repayment by either the ECB or by the eurozone states in the event that Greece did fail to repay is a contract illegal at its formation and therefore void, legally worthless.

    This is from an EU which claims to be based on the rule of law.

  15. Peter van Leeuwen
    July 16, 2015

    It is interesting that so much attention to only 1,8% of EU economy is given by, may I call it, “outsiders”. Nobody obliges the UK to pay or work with euros after all, I thought that you had the pound. The ESFM just provides a quick bridging loan, it will all come back to you and the UK isn’t exposed to any risk. Why not tell the City to shun any euros and let them move their euro business to the continent, it would be ok with us.

    1. a-tracy
      July 17, 2015

      Oh Peter we’re repeatedly we don’t have any money we’re broke too, up to our neck in debts. Our mothers who were told years ago they were retiring at 60 are now working until they’re 65, no debate, no choice, done. Our English children were hit with student fee loans to give them a 9% graduate tax as well as 20% tax, 12% national insurance and 3% nest pension (minimum) just as two examples of immediate measures and then Ireland (who wanted nothing to do with the UK) and now Greece a Euro Zone Country want us to bail them out. Keep on going Europe you’re converting me to the OUT side.

    2. oldtimer
      July 17, 2015

      It may be only 1.8% of the EU economy but it is 100% about how the EU goes about its business.

      The handling of the Greek crisis is not something to be swept under the carpet – though doubtless there are EZ leaders who would like to do just that. It deserves, and through the good offices of John Redwood, is getting the public scrutiny that all actions by those who presume to govern us should get.

      I am surprised and disappointed you seek to shut down this scrutiny and the comment it provokes.

      1. Peter van Leeuwen
        July 18, 2015

        @oldtimer: the 1.8% is just an observation, no attempt to shut down scrutiny, although I much prefer unbiased scrutiny, which as a multilingual citizen I have more easy access to than some. Has this blog ever mentioned the many things which are totally wrong in Greek economy and which now finally may be addressed. Grexit and then drachma devaluation doesn’t help for collecting taxes, doesn’t abolish ridiculous tax freedom for rich ship builders, doesn’t help to break up protected professions which make Greek medication the most expensive anywhere in Europe, etc. etc. etc.

        1. Hope
          July 20, 2015

          Yes it is for Greece to resolve any problems it has, not other countries around Europe or the world. However, if the EU knowingly ensnared Greece by fanciful money, as it did, then it is the fault of the unelected bureacrats of EU. Stupid land grab in building an empire built on sand.

    3. Timaction
      July 17, 2015

      Peter please mind your own affairs in Holland. Our Government has once again been found wanting with exaggerated claims of Treaty change veto’s and opt outs. There are people over here who understand the lies the Government repeatedly tell without being brought to book. In a bygone age these people would have been held to account for their lies and in some cases taken to Court. We however live in an age that the only political party to tell the truth is subjected to constant lies and ridicule by the msm but are always proven to be correct in the end. Cameron/Osborne lied again about the legality of the opt out of the bail out mechanism and are not being held to account by the media. Why?

      1. Peter van Leeuwen
        July 18, 2015

        @Timaction: That party wouldn’t be UKIP by any chance?
        4 million voters, 1 representative!
        Compare that to The Netherlands where the much more extreme Geert Wilders got 10% of the votes and thus 10% of the seats in parliament (in UK terms that would have been 65 seat in the H.o.C)

  16. Jon
    July 16, 2015

    This is not quite kicking the can down the road, that inplies you would deal with the same problem but just later on.

    This is like a love affair that’s run it’s course where one partner doesn’t love the other anymore but doesn’t have the responsibility to call it off and so gives wrong messages. The other partner increasingly gets annoyed at mixed messages and it build up a much worse situation.

    The Greeks we see are now getting angry and violent. I can understand that, they are being led on when it’s over.

    Norway may have given the Nobel Peace Price to the EU but I think we are later to see the folly of that not forgetting the 10,000 suicides already.

  17. Mark
    July 16, 2015

    The Eurogroup like to pretend they are in control, and only releasing funds when loan covenants are met. The reality is somewhat different. The IMF have made it plain that Greece is unable to afford the interest and capital repayments on any of its government debt for the next 30 years, and now accuse the Eurogroup of being unrealistic. They have pointed out that the assumptions behind pretending that the loans are repayable are simply untenable: Greece won’t magically become the fastest growing economy in the EU and stay there (especially while shackled to the €), nor will it achieve a surplus of taxes over spending of 3.5% of GDP for decades ahead, nor can it rustle up the €50bn privatisation proceeds the ECB wants as collateral.

    Perhaps the IMF should take the lead, and write off its €32bn of loans to Greece. Alternatively, it could arrange the production of Drachma notes as part of a Grexit.

    1. Timaction
      July 17, 2015

      It’s all in the Treaties. They don’t allow debt forgiveness. Therefore the Europhiles have to kick the can down the road or admit to their own tax payers and us that they are on the hook for 100’s billions of Greek debt as they cannot repay it!
      Remember that the legacies never tell the truth!

  18. Ian B
    July 16, 2015

    Talking about expensive farces, I see now that the Conservative Party is planning to (a) make everyone pay for the BBC regardless of whether they even have a TV (b) after talk of “decriminalisation” there is now talk of a new “crackdown on evaders”.

    I remain mystified as to why the party that closed the mines, closed the steelworks and shipyards and privatised telecoms and the railways is so determined to maintain nationalised State broadcasting. The party that fought the miners can’t fight a handful of luvvies. It’s depressing and risible.

    “The problem with socialism is that you run out of other peoples money to spend”. Not if you’re the BBC, apparently.

    1. Chris
      July 17, 2015

      I fear, Ian, it is an extremely useful tool for David Cameron in the referendum campaign to stay IN the EU. Now would not be the time (from the europhiles’ point of view) to jeopardise its future…
      As far as I am concerned the BBC should be radically restructured and the licence fee should be abolished.

    2. stred
      July 17, 2015

      Also off subject, we find that the PM has quietly been allowing RAF pilots to take parts in operations in Syria, despite the HoC vote. He could say that the original vote was because action was to be taken against Assad following accusations about chemical weapons, which may have been incorrect, wheras now action is against ISIL, who are nasty for certain. Also, Vlad has his little green men so why can’t Eural have his little blue ones.

  19. Dan
    July 17, 2015

    Even after this latest affront, I’ve no doubt loyalty to the party will trump loyalty to the British people for the Conservative’s so-called eurosceptics.
    They’ll put up with any indignity, and I predict that will include right up to and including their leader either cancelling an In/Out referendum, or refusing to accept a No vote.

    How much more will we hand over?
    Did we ever get the Irish ‘loan’ back?

  20. Denis Cooper
    July 17, 2015

    I now read in the Guardian:


    that it is the ECB which will guarantee that the UK will not lose out in the event that Greece defaults on its EFSM loan, and that according to Osborne “ … the European commission has agreed these changes will be legally binding …”

    Well, it was previously claimed that the political agreement that this illegal bailout mechanism would not be used again and that the UK would be exempted from any future eurozone bailouts was legally binding when it was not, it was legally worthless, but at least that political agreement was itself a legally permitted agreement even if it was legally worthless, while this new supplementary agreement is not only legally worthless but is itself an illegal agreement.

    Article 125 TFEU states inter alia “The Union shall not be liable for or assume the commitments of central governments … “; the ECB is an institution of the Union, and the Greek government which will commit to repaying its EFSM bridging loan is a central government, and the ECB cannot legally offer to “be liable for or assume” that commitment of the Greek government in order to guarantee that the UK will not lose out in the event that the Greek government defaults on its commitment; therefore any such arrangement will be an illegal contract and void from its inception, and the Commission does not have the legal power to rule otherwise.

    Moreover it will not only be an illegal contract under EU primary law, Article 125 TFEU in the EU treaties, because Parliament has passed Acts to approve the EU treaties and incorporate them into our national law it will also be illegal under UK law; so not for the first time we see a minister playing fast and loose with our law and hoping to get away with it on the assumption that most of the population will not understand the technicalities and no MPs will be willing to defend the rights of Parliament by challenging his action.

  21. agricola
    July 17, 2015

    Expensive farce is an apt description. A financial money go round that will benefit the Greek people not one iota, and take Eu.50Billion of their assets outside their jurisdiction.

    Greece is a key member of NATO in a geographical sense. Why are the key members of NATO not suggesting support for them if they leave the horror of the Euro. It is in NATO’s interest that Greece is financially and politically stable. The USA, Canada, UK and others could put in teams to work alongside the Greeks to achieve this end.

    What your leader is doing in this situation one knows not. Having bowed to the election of Juncker, it was agreed in writing that the European Financial Stability Pact would not be used to bail out the Euro. Juncker and the EU are now tearing up the agreement and demanding our contribution. How much more of this dominatrix treatment can your leader take before it goes beyond vicarious enjoyment. What price now any re-negotiation. It will have the same value as Chamberlaine’s bit of paper.

    The time has come when you the conservative party need to demand your leader’s presence before the 1922 committee to explain himself and be told in no uncertain terms that enough is enough. Not to mention the farce of EVEL. Start using the power the election gave you.

  22. Susan
    July 17, 2015

    /sark on
    It keeps the loans nice and fresh?
    /sark off

  23. bluedog
    July 17, 2015

    In the finest traditions of Yes, Prime Minister, Cameron is going to have to change the terms of his referendum. A yes/no vote for continued membership of the EU is starting to look like a dangerously naïve offer. Something more vague and equivocal is likely to be put in front of the electorate.

  24. Mercia
    July 17, 2015

    It’s like we all knew Greece was bankrupt 4 or 5 years ago. Even the politicians in their own country said, ‘We’re bankrupt.’ They all pretend that we can solve the problem but we can’t solve the problem. And it’s pretty well (the same story) everywhere we are drowning in debt, if the bond markets go then the whole thing is going to come tumbling down everywhere.

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