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FinMin: Prague not to face risks over loan to Greece

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Prague, July 16 (CTK) – The Czech Republic will not face a financial loss if a loan to Greece from the older European Financial Stabilisation Mechanism (EFSM) is not paid, since losses will be covered from the Greek bonds at the European Central Bank (ECB), the Finance Ministry said yesterday.
The EU member states’ finance ministers preliminarily agreed on the principles of providing a short-term financial aid to Greece worth 7.16 billion euros from the EFSM yesterday. Details will be officially released on Friday.
All 28 EU members state guarantee for loans from the EFSM, not only the euro zone countries as in the case of the European Stabilisation Mechanism (ESM).
“After the agreement with the countries outside the euro zone, such as Britain, Denmark and Sweden, the Czech Republic participates in the talks about the possibility to provide a short-term loan to Greece for up to three months. However, if Greece does not pay off the loan, the Czech Republic and other countries outside the euro zone will not share the losses, since they will be covered from the yields of the Greek bonds kept by the European Central Bank (ECB),” the Finance Ministry said in its press release.
Subsequently, Greece should be funded from the ESM, in which the Czech Republic does not participate.
Czech Prime Minister Bohuslav Sobotka (Social Democrats, CSSD) yesterday criticised the European Commission (EC) over the planned activation of the EFSM. The mechanism is dead and half-forgotten, he said.
Finance Minister Andrej Babis (ANO) said at a press conference on Monday the Czech Republic refused to guarantee any loan to Greece, and it would not give any direct loan to it either.
On Wednesday, Babis said an EFSM bridging loan to Greece would be acceptable if it came with legally binding guarantees, Reuters reported.
“We have declared since the beginning that we will not guarantee for Greek debts, and we still insist on it. We will lead negotiations only about the possibility of a short-term loan for up to three months with legal guarantees to secure that the Czech Republic will take no risks,” Babis said yesterday.
Thanks to the pressure exerted by the Czech government and other countries that have criticised the use of the EFSM, Prague will probably get a clear guarantee that Czech tax-payers will not finance the aid to Greece, Sobotka said.
“At the same time, we have not blocked the possibility of helping Greece at the moment when it necessarily needs a quick financial injection and it has already started fulfilling the agreements from the weekend’s euro summit,” Sobotka pointed out.

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