'No Bailout' Clause? The EU's Greek Rescue Problems

There's chatter in the financial community that a bailout package for Greece will arrive from the European Extraordinary Summit on Thursday. But there is little certainty in Brussels about what will be delivered, or if a move would have any legal basis.

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The success of the summit will depend on what the markets call a bailout, said Daniel Gros, director of the Centre for European Policy Studies.

"Would a simple promise to help in case Greece needs, a promise for a debt guarantee, be seen as a bailout? Well, that is possible," Gros said. "But if the markets really want to hear a detailed plan saying 'we'll give Greece credit today,' that will be much more difficult."

There's a sense in Brussels that it is still is too early to present a complete and detailed bailout plan for Greece, according to Paul de Grauwe, an economics professor at Leuven University who also works as a policy advisor for the European Commission President Jose Manuel Barroso.

"It doesn't make sense for the EU leaders to come up with a detailed plan as there's no default yet," De Grauwe said.

"Another problem with having a bailout plan now is that, before the EU spends its money saving Greece, the Greek people have to understand how serious the situation is," Gros added. "Otherwise there will be no change of behavior and therefore this will be just money thrown away, as they will simply come back later for more."

Apart from that, the European Commission has just presented a plan for Greece to start cutting its budget deficit. And many officials said that they should wait for results before anything else.

The 'No Bailout' Clause

European Policy Centre CEO Hans Martens agreed with the wait-and-see scenario, adding that "if the leaders want to bailout Greece, they can, but without a legal basis."

Martens is referring to the 'No Bailout' clause in the European treaty. Article 103 says that: the Union shall not be liable for or assume the commitments of central governments.

This article was specially written to leave ensure no EU country would be saved by the EU if it doesn't respect the Union's economic rules. And that's precisely the case in Greece.

On the other hand, if the European leaders are really willing to aid Greece, they can simply ignore the first clause and go with article 122, which states: when a member-state 'is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council [of national governments], on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member-state concerned.

Beyond its control is strongly arguably here, but it might be overlooked for the sake of euro-zone health.

Another theory making the rounds in Brussels is that a bailout will not be offered to Greece, but to the European banks that have high exposure in Greece. That would cut a lot of the risk surrounding Greece, and then the EU would give the Greek government more time to work on its own crisis.

In any case, all of the officials and analysts CNBC spoke to in Brussels agree on one point: the future of Greek bonds in the markets at the moment depends very much on what the EU Summit statement says on Thursday.

If investors perceive the message to Greece as strongly committed, it will give the country a little more time to work on reforms.

If investors don't, EU leaders -- like Sisyphus of mythology, condemned to roll a boulder up a hill only to watch it roll back down each time -- the EU leaders might be back in Brussels again.