Greece Wants E.U. To Use Old Latvia Fund For Bailout

Greek leader George Papandreou and Socialist parties across Europe have called on the E.U. to re-deploy for Greece an existing European bailout fund, originally established to rescue Latvia, Hungary and Romania. The Party of European Socialists, representing social-democrats from the continent, issued the fresh bailout proposal at a meeting in Brussels, Thursday.

“It’s a clear and simple solution. It shows that where there’s a will, there’s a way.”

George Papandreou

George Papandreou

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-euro zone EU countries. Mr. Papandreou says he will put the proposal on the table at the two-day E.U. spring summit, starting in Brussels today.

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 lent on to the recipient countries.

“It’s a clear and simple solution. It shows that where there’s a will, there’s a way,” the Greek PM says.

The Danish chief of the PES, Poul Nyrup Rasmussen, says that no E.U. treaty change would be needed, with the existing E.U. agreement forbidding a bailout of a euro area country by its peers.

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

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

The Danish PES-chief also took a swipe at Germany’s leader, Angela Merkel, who has until recently ruled out a euro zone bailout of Greece:

“This could have been realized earlier, but because of Berlin, we have lost two months.”

Mr Papandreou says he will put the proposal on the table at the two-day E.U. spring summit, which also began in the EU capital on Thursday.

Source: EUobserver.com

Related by the Econotwist:

European Markets: Tumbling Dice

G7-Countries In Deep Trouble

Merkel: Kick’em Out!

Force The Rich!

Greece: “Exploiting The Fear”

Is Europe’s Debt Crisis Over?

E.U. Working On Greek Rescue Plan To Be Funded By Governments

E.U. To Reform Economic Policy

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