Callanan points out that Portugal’s situation has come about largely because of its government’s poor fiscal and economic policies and a failure to liberalise its markets.
He claims that bailouts under Article 122 of the Treaty – meant for natural disasters – are unjustifiable in Portugal’s case and have been described by France’s finance minister as “major transgressions” of the Treaty. He also says that the European Financial Stability Fund could easily cover the €60-€70bn costs of bailing out Portugal, while still maintaining its AAA credit rating and leaving enough in the pot to cover another major bailout.
It is estimated that any potential UK element of the bailout could be between £3-5bn. Finance ministers will meet this evening in Hungary to discuss the request.
“We wish the Eurozone well in rescuing Portugal’s economy but the UK cannot and should not play a part in the EU bailout,” comments Callanan. “The Eurozone has set up a €440bn fund [the European Financial Stability Fund] to cover this kind of eventuality, and so far only €17.7bn of that has been allocated to Ireland. Even if the uppermost figure of €80bn is needed, there will be enough remaining to cover another bailout and retain the EFSF’s AAA rating.
“The legality of bailouts under article 122 of the EU treaties is still highly dubious. The article was intended to cover natural disasters not bailouts for countries who have sleep-walked into this crisis through their own socialist policies.
“I am glad to see the Treasury indicating that Ireland was a special case and that a similar bilateral offer for Portugal is not on the table. We must stick to our guns and remind the other Member States that we have the Treaty on our side.
“British voters will not accept that at home we are making tough but fair savings only to send money to countries that should never have been allowed to join the Eurozone in the first place.”
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