Austrian Greens threaten to hold up ESM safety net

VIENNA, June 24 Fri Jun 24, 2011 7:39am EDT

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VIENNA, June 24 (Reuters) - Austria's opposition Greens could block creation of the euro zone's permanent rescue fund for indebted countries unless it binds in contributions from the private sector, the party's leader said on Friday.

Opposition from the environmentalist party could prevent the governing coalition of Social Democrats and conservatives from winning the required two-thirds majority approval when Austria's parliament addresses the European Stability Mechanism (ESM).

Greens leader Eva Glawischnig told Reuters the party had reservations about the 700 billion euro ($990 billion) ESM, which EU leaders have approved but which needs a change to the EU's Lisbon Treaty to take effect.

Noting banks and "profiteers" had made big returns in the run-up to Greece's debt crisis, private investors now had to be roped into rescue efforts for the Greens to support a change to the treaty's language, she said.

"If this accord does not contain a proper possibility (for the private sector) to participate, we see no reason to vote for the treaty," she said.

Officials have stressed any contribution by investors to Greece's crisis had to be truly voluntary to avoid triggering a "credit event" that ratings agencies would view as a default.

But Glawischnig countered: "If you wait too long or don't do this, the whole risk will remain with European taxpayers in every case. This cannot be a stable solution."

She also linked the issue to Greens' calls for euro zone members to issue joint bonds as a way to finance investments in countries like Greece.

Government spokesman Nedeljko Bilalic said he was confident of reaching an agreement.

"The ESM doesn't take effect until 2013 so we have time until then to hold talks, with the Greens as well," he said.

No date has been set for the ESM vote, he said, while a vote on topping up the existing European Financial Stability Facility in autumn requires only a simple majortity.

The coalition has 108 of the 183 seats in the lower house and the Greens 20. With far-right parties opposed in principle to further bailouts, the government needs support from the Greens to get two-thirds backing for the ESM.

Asked if the Greens would block approval if their demands were not met, Glawischnig said: "Let's see. I would stress that it is the others who don't want a lasting solution are the ones that are blocking it. We want to have a good solution."

A Gallup poll published by the Oesterreich paper on Friday showed 48 percent of 800 Austrians surveyed opposed having the EU send a 12 billion euro tranche of loans to Greece next month and 41 percent were in favour.

But 52 percent opposed letting Greece go bankrupt.

(Editing by Stephen Nisbet)

($1=.7066 Euro)

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