A last-resort rescue net is gradually being pulled into shape, writes ARTHUR BEESLEYin Brussels

BAILOUT BY ordeal. Numerous questions remain, but euro group finance ministers have all but cleared the way for the creation of a last-resort credit line for the Greek government. While the EU authorities still hope to avoid having to make good on their pledge of special aid, events are moving step by aching step in that direction.

For all the caveats around what exactly was agreed on Monday night – there are many – the rescue net is gradually being weaved into shape. There would be no loan guarantees. Rather, an EU-managed system of bilateral loans would be deployed.

The scheme would have a centralised element, says Greek finance minister George Papaconstantinou, so he would not have to conduct separate negotiations with other countries.

Still unresolved, however, are the terms, timing and triggering mechanisms for any intervention. As in any loan deal, these questions are core. All we know right now is that Luxembourg prime minister Jean-Claude Juncker, who presides over the euro group, has said the scheme would include “strong incentives to return as swiftly as possible to the markets”.

This means penalty interest rates for Papaconstantinou and his boss George Papandreou, something they already face. Although the Greeks have argued for weeks that agreement on an EU rescue scheme would relieve the interest charges they must pay on billions of euro of debt, Juncker’s remarks suggest they won’t be getting a free ride. Far from it.

From several perspectives, this is crucial. No one wants to encourage other errant governments to follow Athens. Neither does anyone want to raise the unappealing spectre of moral hazard, as any reward for bad Greek behaviour would doubtless do. This leads to the ultimate point: that no one wants to have to deliver any rescue at all.

Thus the EU net is being contrived as a stretching-machine alternative to the bed of nails on which Greece currently rests.

That said, however, a back-stop rescue plan may yet dilute the threat of seismic market shock that looms as the Greeks prepare to refinance more than €20 billion that falls due in April and May. While the Greeks have no choice but to go to the market in the coming weeks, any failure to find buyers for their bonds would be catastrophic.

Hence Papanconstantinou’s clamour for immediate clarity over the shape of any rescue net – and the torrent of EU pressure that culminated in a new swathe of austerity measures a fortnight ago. “We would like to have a loaded gun on the table and hope never to have to use it,” the minister told reporters here yesterday.

Not so fast, warns Germany and other countries that would foot the bill. Despite everything, the ministers still insist it remains within Greece’s powers to resolve its financial problems without leaning on Europe.

However, attention has already turned to an EU summit late next week. Even though EU leaders are desperate to avoid being seen to have Greece dominate their agenda, the issue will inevitably surface.

“There will be a final agreement, I hope, next week,” British chancellor Alistair Darling told reporters here yesterday. Easy for him to say, of course. As a non-euro member, Britain wouldn’t be on the hook in any Greek rescue.

As for who actually writes the cheques, it was long presumed that Germany and France would dominate. There’ll be no change there. However, we learned on Monday night that all members of the single currency would be asked to take part.

The unavoidable implication is that even a euro minnow such as Ireland would be involved in some way. Overbearing pressure on the home economy notwithstanding, solidarity is still expected of the Irish people.

And who are we to refuse? What goes for one currency member goes for another. Minister for Finance Brian Lenihan is on record as saying membership of the euro and access to the ECB helped avert “a general financial collapse of the Irish State”.

For all that, Dublin would hardly play a prime role in any rescue. Irish GDP, for example, represents but 1.25 per cent of the EU total. Yet even if the Government’s participation was minimal, the activation of any scheme would still see Ireland assuming some of the weight of the Greek crisis.

How does the Government square that with the fact that Irish people are already saddled with the onerous costs of rectitude at home? “We never answer hypothetical questions,” says Lenihan’s spokesman.

In this fast-moving affair, however, hypothetical scenarios became reality by the day. Sooner rather than later, the Government could yet find itself helping to prop Greece up.

In recent times, it has been remarked that Juncker is the last surviving European leader of the generation that introduced the euro bailout ban in 1992. As the single currency faces its greatest test, what was long taboo draws closer and closer.