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.

• Primary Source

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