Brussels backs using EU rescue fund for Greece

The European Commission on Wednesday formally backed a controversial proposal to use an EU-wide crisis fund to cover Greece’s short-term cash needs, officials said, setting up a clash with Britain and Germany.

While it waits for a bailout deal sealed on Monday to kick in, Athens desperately needs money for several imminent payments including 4.2 billion euros ($4.6 billion) owed to the European Central Bank (ECB) on Monday.

But Britain, which does not use the euro, has already vowed to resist any bid to use the European Financial Stabilisation Mechanism (EFSM), an emergency fund, saying aid should come from the 19-country eurozone and not the full 28-nation EU.

EU officials told AFP the Commission, the EU’s executive arm led by Jean-Claude Juncker, had “prepared these proposals and submitted them to the (European) Council,” which groups the leaders of the 28 member states.

This was “in case we do not find another solution” for financing Greece until mid-August, one official said.

The short-term bridge loan would be for seven billion euros, and would ideally only be needed for four weeks until the new bailout programme is in place, officials said.

British Finance Minister George Osborne rejected any attempt to use the fund at a meeting in Brussels on Tuesday, saying it was a “complete non-starter.”

But the EU’s complex voting rules mean that any decision on whether to use the fund would be by a weighted majority, meaning that Britain could not veto it and would have to rally other states if it wanted to block the move.

Germany’s hawkish Finance Minister Wolfgang Schaeuble expressed doubts about the “not very constructive” Commission plan, but it is not clear which way Berlin would vote on the matter.

The Commission was now in discussions to find ways to “reassure” non-euro states, including options for collateral, to ensure that any money from the EU budget is recouped, EU diplomats said.