Parliaments will need to endorse guarantee plan

APPROVAL PROCESS:THE €440 billion European bailout fund which forms part of the €750 billion EU/International Monetary Fund (IMF) plan for distressed euro countries faces hurdles in several member states.

Parliamentary approval was required in 15 countries for the €110 billion loan package for Greece, one of them being Ireland.

European Commission officials say similar approval will be required to empower euro countries to guarantee rescue loans issued by a “special purpose vehicle” which is at the heart of the plan adopted in early yesterday by EU finance ministers.

However, they say the smooth enactment of legislation on the Greek plan in several euro countries suggests there will be no major problems. In addition to the €440 billion guarantee plan and €250 billion from the IMF, the package includes some €60 billion from the funds of the European Commission.

Legislation is not required to trigger the activation of the commission’s contribution, so such funding could well be used first if any country needed aid.

The Government expects next week to introduce legislation in the Oireachtas to give effect to its participation in the scheme. Ireland’s bilateral loans to Greece could reach €1.3 billion if the country draws down the amount promised by its EU partners.

Attached to this legislation is a memorandum of understanding between the European Commission and the Greek government which sets out the austerity measure tied to the rescue aid.

A Government spokeswoman said “once details are clarified of how the special purpose vehicle would work, the Government will seek legal advice on whether legislation would be necessary in the event of the mechanism ever being activated.” One possibility would be to follow the example of the Greek case by introducing fresh legislation whenever the European authorities decide to activate any aid plan for a country.

In Germany, chancellor Angela Merkel said her administration aims to quickly pass Berlin’s share of the rescue plan. Dr Merkel’s cabinet is to meet today to approve Germany’s contribution.

She said she did not want to waste time but there was time to discuss it properly. “We don’t need to pass the law in two or three days. We can conclude the consultations with a bit more time, quickly but thoroughly, because €60 billion . . . are already available without any legal measures necessary,” she said.

French finance minister Christine Lagarde suggested yesterday that non-euro countries such as Poland and Sweden may make contributions to the guarantee scheme.