Dombrovskis: EFSM is ‘best possible’ solution for Greece. Greece debt crisis: ECB raises funding for Greek banks

The European Commission (EC) submitted on 15 July 2015 a proposal to use the European Financial Stability Mechanism (EFSM) as the source of a loan to provide Greece with short term financing until a new bailout is agreed between the country and its creditors.

The loan would amount €7 billion, covering the weeks between the agreement reached on 13 July and its implementation. EC's vice-president Valdis Dombrovskis considered this to the best alternative in the absence of a perfect solution.

Several non-eurozone member states signalled their initial opposition to the proposal, namely the Czech Republic, Denmark, Sweden and the United Kingdom, as this possibility had already been discussed in the ECOFIN meeting on 14 July. However, Mr Dombrovskis vowed to reassure these countries that measures would be adopted regarding repayment of this loan. Reports later suggested that the UK would not be against the proposal.

Created in 2010, the EFSM was used to bail out Ireland and Portugal and had not been used since the creation of a permanent bailout fund, the eurozone-only European Stability Mechanism (ESM), in 2012.

On 16 July 2015, European Central Bank's president Mario Draghi unveiled the decision to increase the emergency funding to Greek banks, allowing them to open after 3 weekes being forced to stay closed. This came as a result of the approval by the Greek parliament of the latest bailout agreement. However, capital controls would have to remain in place, according to reports.

Mr Draghi defended the need for some sort of debt relief, joining the International Monethary Fund in the calls for a programme to restructure Greece's debt. However, Germany did not seem to accept such solution, as it became clear during the debate before the parliamentary approval of the bailout agreement of 13 July 2015.

BBC News, 15.07.15: Greek bailout: PM says UK won't provide interim funding http://www.bbc.co.uk/news/uk-politics-33532485

The Telegraph, 13.07.15: EU demands Britain joins Greek rescue fund http://www.telegraph.co.uk/finance/economics/11737286/EU-demands-Britain-joins-Greek-rescue-fund.html

EUObserver, 15.07.15: EU commission proposes controversial short-term funding for Greece https://euobserver.com/economic/129655

EUObserver, 16.07.15: UK to accept Greek short-term loan https://euobserver.com/economic/129667

EUObserver, 14.07.15: Britain to block Greece short-term funding solution https://euobserver.com/economic/129637

EurActiv, 14.07.15: Britain resists contributing to new Greek bailout http://www.euractiv.com/sections/uk-europe/britain-resists-contributing-new-greek-bailout-316285

EurActiv, 15.07.15: Scandinavians back Britain's rejection of Greek bridge financing http://www.euractiv.com/sections/euro-finance/scandinavians-back-britains-rejection-greek-bridge-financing-316296

Politico, 15.07.15: Greece to get €7 billion EU bridge loan http://www.politico.eu/article/greece-to-get-e7-billion-eu-bridge-loan/

Open Europe, 14.07.15: Bridge financing for Greece – what are the options and should the UK be involved? http://openeurope.org.uk/blog/bridge-financing-for-greece-what-are-the-options-and-should-the-uk-be-involved/

Open Europe, 15.07.15: Will the EU regret dragging the UK into Greek bailout? http://openeurope.org.uk/blog/will-the-eu-regret-dragging-the-uk-into-greek-bailout/

European Commission: COM(2015) 357, 14.07.15: Proposal for a Council implementing decision on granting short term Union financial assistance to Greece http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/2015-07-14_commission_proposal_357_en.pdf

EurActiv, 16.07.15: UK wins EU concessions over Greece http://www.euractiv.com/sections/uk-europe/uk-wins-eu-concessions-over-aid-greece-316363

ESO: Background information: Extraordinary Eurogroup meeting, 11-12 July 2015 / Euro Summit, Brussels, 12-13 July 2015 / European Council, Brussels, 12 July 2015 http://www.europeansources.info/record/extraordinary-eurogroup-meeting-11-12-july-2015-euro-summit-brussels-12-13-july-2015-european-council-brussels-12-july-2015/

ESO: Background information: The Greek debt crisis: Key sources http://www.europeansources.info/record/the-greek-debt-crisis-key-sources/

European Commission: DG Economic and Financial Affairs: Financial assistance to EU Member States: Greece http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/index_en.htm

EurActiv, 17.07.15: EU releases funds for Greece http://www.euractiv.com/sections/euro-finance/eu-releases-funds-greece-316398

EUObserver, 17.07.15: Lagarde: No IMF in Greek bailout without debt relief https://euobserver.com/economic/129684

BBC News, 16.07.15: Greece debt crisis: ECB raises funding for Greek banks http://www.bbc.co.uk/news/business-33547117

EUObserver, 16.07.15: Greek banks expected to reopen on Monday https://euobserver.com/economic/129679

European Commission: DG Communication: RAPID: STATEMENT/15/5408, 17.07.15: Greece: press remarks by Vice-President Dombrovskis http://europa.eu/rapid/press-release_STATEMENT-15-5408_en.htm

Council of the European Union: Press Release, PRES/15/593 (17.07.15): EFSM: Council approves €7bn bridge loan to Greece http://www.consilium.europa.eu/en/press/press-releases/2015/07/17-efsm-bridge-loan-greece/

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