Eurozone members withhold €1bn Greek bailout money

10 May 12
Eurozone members have withheld part of their latest tranche of bailout funds for Greece, as doubts continue over the country’s commitment to meeting the terms of its agreements and remaining in the single currency bloc.

By Nick Mann | 10 May 2012

Eurozone members have withheld part of their latest tranche of bailout funds for Greece, as doubts continue over the country’s commitment to meeting the terms of its agreements and remaining in the single currency bloc.

The European Financial Stability Fund announced last night that it would pay Greece €4.2bn of the €5.2bn it had been scheduled to receive today to help service its debts.

In a statement, the directors of the fund, which was set up by the eurozone members in May 2010, said: ‘The remaining funds of €1bn are not needed before June and will be disbursed depending on the financing needs of Greece.

‘As with previous disbursements to Greece, the EFSF will transfer the €4.2bn into a segregated account which will be used for debt service payments.’

The decision to withhold 20% of the payment is understood to reflect concerns that Greece’s commitment to austerity measures might waver following the country’s elections last weekend.

Parties opposed to further spending cuts made major gains. Since then there have been two unsuccessful attempts to form a new coalition, by both the centre-Right New Democracy and radical Left Syriza bloc.

Today Greek president Karolos Papoulias gave Pasok leader Evangelos Venizelos, who was finance minister under the previous governing coalition, a mandate to try to establish a new administration.

At the same time, the UK introduced draft legislation to formally endorse the European treaty change needed to create a new permanent eurozone bailout fund without the involvement of the UK. The European Stability Mechanism is expected to be established later this year to replace the temporary EFSF and European Financial Stabilisation Mechanism funds.

Introducing the EU (Approval of Treaty Amendment Decision) Bill to the House of Lords, UK foreign office minister Lord Howell said: ‘This will be a fund by the eurozone, for the eurozone, and, unlike the situation this government inherited, the UK will not be liable through the EU budget for any future eurozone bailouts.

‘This treaty change will help eurozone countries take forward a key aspect of their plan to resolve the crisis and secure financial stability.’

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