Ireland bail-out: Never again?

George Osborne will try to reassure his party today that Britain's participation in the EU bail-out of Ireland will not set a precedent for any other eurozone country.

Bill Cash and George Osborne

He is responding to the concerns articulated today by the grand-daddy of Eurosceptics, Bill Cash, who claimed that:

"Germany and others want Britain to be caught up in the web of the Stabilisation Mechanism, wrongly signed up to by Alistair Darling - and we are going along with it all. What therefore is the point of an opt-out on this? We are being trapped into a situation of more Europe, not less... Over and over again, we are told we are resisting integration when in fact we are going along with it."

The "mechanism" Mr Cash is referring to was agreed in the midst of the Greek euro crisis over that weekend in May which followed the UK general election. It's controversial because, unlike the eurozone bail-out "facility", its legal basis is questionable: it uses parts of EU treaties which refer to assistance after natural disasters; it is administered by the EU Commission and had previously been limited to helping non-eurozone countries with balance-of-payments problems.

Back in May Alistair Darling attended an emergency meeting of European finance ministers while coalition talks dominated the news in London. He agreed to more than to double the mechanism funds available and to allow its use by eurozone countries. George Osborne, who he consulted that weekend, had wanted him to abstain but accepts that this would have made no difference to the outcome as Britain had no veto and could not form a blocking minority.

Last week the prime minister told the Commons Liaison Committee:

"This mechanism exists, it operates because of QMV (Qualified Majority Voting); we are part of it because of the actions of the last government."

If all its funds are not used up on Ireland, the mechanism could be used again. George Osborne is signalling that when it comes to an end in 2013, he will fight to ensure that Britain never again pays to bail out a eurozone country - unless, of course, ministers choose to.

His problem is that many Eurosceptics in his party have heard these sort of reassurances before from both Conservative and Labour ministers and they've long since stopped believing what they're told.

Update 1828: No-one in the Commons challenged the chancellor's claim that bailing out Ireland was in the national interest.

No-one cast doubt on his belief that the UK will get its money back.

George Osborne could not, however, reassure MPs on both sides of the House that after Ireland there wouldn't be more bail-outs which Britain would have to contribute to via the EU "mechanism".

He plans to re-negotiate the mechanism when it runs out in 2013.

He hopes that there are no bail-outs between now and then.

He insists that Ireland is a special case.

However, he knows that the mechanism may get used again and that Britain would struggle to stop that. In the meantime, he'll come under pressure abroad to grant the EU more power and more cash to deal with the next crisis. And he'll come under pressure at home to say "No".

Source: http://www.bbc.co.uk/blogs/nickrobinson/2010/11/euro_debt_never.html

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