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Britain faces bill of £7bn to bail out Greece if eurozone crisis continues
By Dan Atkinson, Mail on Sunday Economics Editor
Last updated at 1:49 AM on 10th January 2010
Britain could be forced to spend billions of pounds to help rescue Greece, the most crisis-hit member of the eurozone.
If a rescue fund for the troubled Greek economy matched the country's towering budget deficit, the UK would be asked for £7billion, assuming contributions matched each country's share of the total European Union economy.
That is the equivalent of 2p on the basic rate of income tax.
Although Britain is not in the eurozone - and despite the fact that many of Greece's problems arise from it having joined the single currency - the UK could be forced into part-funding a bailout under the EU treaty if a majority of other members vote for it.
A Treasury source would not comment on whether any official calculations have been made regarding Britain's potential exposure.
But with the Athens government expected to borrow £48billion this year, any rescue would be likely to relate to that figure.
If contributions were based on a share of EU gross domestic product, then the UK, with about 15 per cent, could face a demand for more than £7billion.
If other troubled eurozone members such as Ireland or Spain were excused from making a contribution, Britain's share could be even larger.
Greece last week pledged to speed up fiscal reforms to try to get its budget deficit down as quickly as possible.
Although its deficit, at 12.7 per cent of GDP, is much the same size as Britain's in relation to its economy, markets have been much more sceptical about its ability to repay.
Until now, discussion has focused on whether fellow eurozone members could be asked to bail out Greece. But under Article 122 of the treaty, all EU members could be liable.
It says: 'Where a member state is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the council of ministers, on a proposal from the European Commission, may grant, under certain conditions, Union financial assistance.'
The council decision would be made on a majority vote with Britain having no veto.
It is thought that the Treasury believes talk of bailouts risks becoming a self-fulfilling prophecy. It is also understood that it believes any bailout would take place only with broad agreement and that it may include non-EU countries.
Greece's problems have been caused by a mixture of recession, a costly public sector and a huge hidden economy that does not contribute to State revenue.
I recommend that England also tell modern "greece" that the Elgin Marbles stay in England forever after this big payout
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