UK Politics

MPs worried over UK role in potential Portugal bail-out

MPs have expressed concerns that the UK will have to contribute to a potential bail-out of the Portuguese economy.

Tory MP Bill Cash said the UK was "potentially exposed" to a 4bn euro (£3.4bn) rescue of Portugal's economy after its debt crisis worsened.

Ministers say Portugal has not asked the UK for financial assistance and speculation was "inappropriate".

But government sources have acknowledged the UK would be liable to contribute to any EU bail-out.

Portuguese MPs rejected its government's proposed austerity measures on Wednesday, prompting its prime minister to quit and making EU intervention more likely.

The UK contributed to the bail-out of the Irish economy earlier this year through the European Financial Stabilisation Mechanism to which all EU member states are signed up.

'Hard-pressed'

The UK is not liable to contribute to a separate European Financial Stability Facility funded by members of the single currency.

Although it is not clear which fund would be used to support the Portuguese economy should it make a formal request for help, MPs have expressed concerns about the financial implications for the UK.

In an urgent question in the House of Commons, Mr Cash said the mechanism "involves the UK underwriting approximately 8bn euros to eurozone countries until 2013", and urged the prime minister to renegotiate arrangements underpinning it at Friday's summit of EU leaders.

"This course of action is open to the prime minister and to relieve the hard-pressed British taxpayer," he told MPs.

And Labour MP Gisela Stuart said: "As we do not have a vote on the bail-out mechanism, should Portugal apply for it, we could be exposed. We do not have a veto and therefore would be forced to, irrespective of which government negotiates it."

Treasury Minister Mark Hoban said it was in the UK's interest to have a "strong and stable" eurozone area but it was wrong to speculate about "hypothetical" events in Portugal.

A No 10 spokesman said that, because of existing arrangements, the UK would still liable to contribute if a bail-out was agreed by EU leaders.

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