The European commission has proposed a €7bn (£4.9bn) emergency loan for Greece from an EU bailout fund, defying the UK and other non-eurozone countries that object being on the hook for a crisis in the currency union.



Didn’t EU leaders just agree to an €86bn bailout for Greece?



After poisonous negotiations, Greece’s creditors agreed to a three-year bailout worth up to €86bn, but it will be weeks before Greece sees a eurocent of that. The deal was effectively a promise to start negotiations on unlocking financial aid from the eurozone bailout fund, the European Stability Mechanism. Talks are expected to take four weeks, but will not even start until the Greek parliament has passed laws to reform VAT and pensions. The problem is that Greece’s economic collapse is happening far more rapidly. A bridging loan has been proposed to fill the gap.



What is the €7bn for?



Greece needs €7bn by Monday 20 July. A total of €4.2bn is due to the European Central Bank and €2.5bn to the International Monetary Fund to clear arrears. The Greek government also has to fund wages and pensions. The country is broke and the banks are shut.

But the bridge loan being discussed is not enough to cover four weeks of negotiations on a permanent bailout. In the first half of August, the Greek government must find a further €5bn to pay its debts and it is not clear where from. EU officials say they are waiting to see how quickly negotiations on the permanent bailout progress.

Why are countries outside the euro being asked to chip in?



Because no one came up with a better plan. Valdis Dombrovskis, the European commissioner, thinks using the EU-wide bailout fund known as the European Financial Stabilisation Mechanism is the least worst option. Another option would have been for eurozone countries to offer bilateral loans to Greece. But not even France, which proposed this idea, has volunteered any money.

Doesn’t the UK have an opt-out from eurozone bailouts?



In 2010 David Cameron announced he had a “black and white” guarantee that British taxpayers would not be drawn into eurozone bailouts. The prime minister was referring to an agreement stating that the EFSM should not be used “to safeguard the financial stability of the euro area as a whole”. But the commission thinks the agreement does nothing to outlaw loans to a single country, although Dombrovskis acknowledged this technical argument created “a political problem”.

Will taxpayers lose out?



Countries outside the eurozone are likely to be offered guarantees against losses, so are very unlikely to lose any money if the plan goes ahead. A UK official said the government was “immovable” on the principle that British taxpayers’ cash should not be put at risk, but was prepared to be constructive.

Eurozone countries are unlikely to get the the same guarantees, but the bridge loan is meant to be repaid within three months once the €86bn bailout kicks in. Greece’s pressing need for debt relief, highlighted by the IMF’s devastating analysis, suggests repayment of the €86bn is far less certain.

What happens next?

Eurozone finance ministers will discuss bridge finance options in a conference call on Thursday. Use of the EFSM fund would have to be approved by all 28 EU member states by a qualified majority. The UK could be outvoted, but it may drop its opposition if it is satisfied with the guarantees on offer.