British bill for saving Euro hits £29bn

G20 leadersPA

It's a huge price to pay for propping up a currency that we specifically chose to opt out of because we felt it was an unsustainable idea. But yet again Britain has agreed to dig deep and bail out the Euro to the tune of £29 million.

So why are we doing this?

The bailout plan

The sum was agreed at the G20 meeting, as the IMF bailout fund was increased dramatically to £600 billion, to deal with the crisis, as problems began to emerge thick and fast from around the continent.

The meeting took place against the backdrop of utter chaos in Greece, where the other EU leaders forced Greek leader George Papandreou to abandon plans for a referendum on spending cuts on pain of being forced out of the Euro.

Commentators are saying this is likely to take place anyway, and they are working on how to get Greece out of the single currency without causing untold damage to those countries remaining in it.

Meanwhile problems were rumbling in Portugal, as Portuguese prime minister Pedro Passos Coelho said the country needed better terms for its £67 bailout, to let it cut with less pain. He highlighted this was no re-run of the Greek saga, it just wanted a tiny bit more breathing room. However, this will have to translate to more generosity from those funding the bailout yet again - and you're right that did include Britain.

Then, of course, the massive debts of Italy are still to break.

Stepping in

It's no wonder that the IMF felt it needed more emergency cash available and called on the G20 to put the money aside ready for the next major financial nightmare.

David Cameron said: "When the world is in crisis, it is right that you consider boosting the International Monetary Fund, an organisation founded by Britain in which we are a leading player. No government ever lost money by lending to the IMF that supports countries right around the world. But what we wouldn't support is the IMF investing directly in some euro bailout fund. That wouldn't be right and we won't back it."

Do we need to do this?

And why is it right that we should be funding the bail out of these countries? Why can't we just let the Euro go to the dogs and countries deal with their own financial nightmares?

It's something that Tory rebels are calling for. When we increased our contribution to the fund last time 31 Tories defied the whip and voted against it. It's a long way from losing a vote, but given that 81 broke ranks when it came to supporting a referendum on EU membership, it's not completely impossible that the Coalition has a fight ion its hands to get this vote through.

So why is it bothering?

Because it can't afford not to.

It's not just that Europe is a massive export market for the UK, and without it we would see the economy implode as struggling businesses go to the wall in their hundreds. It's also that we are financial bound up with the banks. We may not have massive exposure in lending to European banks, but we have exposure to those banks which have lent to Europe, and the interlinking of the international banking system means that letting one fall threatens to bring down the whole house of cards.

The good news

However, while this is essentially the rock and the hard place, there is some comfort to be gained from the fact that the IMF loans will eventually be repaid. Even if all the other debt a country owes is abandoned in a flurry of irresponsibility, the debt to the IMF cannot be written off. It will be paid back - with interest - so we will eventually get our money back.

It's scant consolation for the fact this is going to cost us a small fortune at a time when clearly we don't have a penny to spare. But in the end it may just be worth it.

But what do you think? Let us know in the comments.

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