Will the eurozone honour its gentleman deal with UK or will Britain be forced to contribute to another bailout
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UPDATED:
20:19 GMT, 9 June 2012
Britain's likely exposure to a collapse of one or more of Europe’s big economies has been the subject of wildly differing estimates.
But the big variable in any calculation is simple. Will the eurozone honour its gentleman’s agreement with George Osborne or, if under extreme pressure, would it break it
Under present arrangements, Britain is insulated from any future bailout other than through its role as a key member of the International Monetary Fund.
Gentleman's deal: The UK is insulated from any future bailout, under current arrangements, other than through its role as an IMF member
But this is simply a political
arrangement and does not invalidate Article 122 of the European Union
treaty. Under this, any country can be forced to contribute to a bailout
on a simple majority vote of the other countries.
It
has been estimated that were Italy and Spain to need rescuing, the
total bill would hit between 1.36trillion and 1.6trillion. Of that,
about two-thirds would be expected to be contributed by the EU and one
third by the IMF.
Britain’s shareholding in the fund is 4.5 per cent, so it could be liable for between 20.4billion and 24billion.
But,
in theory, if the deal broke down, the UK could be liable for about 13
per cent of the EU share of the bailout as well, this being the size of
Britain’s contribution to the EU budget.
That
would add a further 118billion to 137billion to Britain’s total
possible exposure, greatly in excess of the original estimates.
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