ANALYSIS:How the ECB might legally provide liquidity to Greece is engaging legal minds in Brussels, writes ARTHUR BEESLEY

EU LEGAL experts are exploring how they can overcome the “no-bailout clause” in the European treaties to enable the European Central Bank to take part in a scheme to provide exceptional loans or loan guarantees to Greece.

At issue in high-level discussions in preparation for a crucial meeting of euro-zone finance ministers on Monday night is whether the countries participating in any bailout – most likely Germany and France, and possibly a handful of others – could make use of ECB liquidity or guarantees in any rescue.

“This is the core issue we face,” said a source briefed on the discussions.

Nevertheless, it is only one of several prickly conundrums that flow from a declaration by EU leaders of their willingness “if needed” to prop up Greece to avert a sovereign default within the euro zone.

As the financial markets demand clarity around any intervention, member states are now under pressure to deliver details of a scheme they are keen to avoid deploying.

Still to be resolved is the scale and scope of any rescue and the extent of national participation by the strongest members of the euro zone.

France was a little quicker out of the traps than Germany, for example, and the initiative came to life only after chancellor Angela Merkel reluctantly authorised talks.

Although the declaration read out by European Council president Herman Van Rompuy is described as something the two countries “can live with”, it is acknowledged that further tension is inevitable.

Merkel, Europe’s paymaster, remains suspicious of any rescue and would inevitably be at the receiving end of a political backlash at home.

This runs counter to the relative enthusiasm of French president Nicolas Sarkozy.

Van Rompuy’s statement stopped short of setting out how Europe might intervene, leaving the details to be worked out by finance ministers.

The market’s demand for answers is underscored by the continued slide in the euro’s value.

While bilateral intervention is at present the favoured mode of rescue, officials acknowledge that some form of ECB involvement would strengthen any scheme.

According to informed sources, ECB president Jean-Claude Trichet is willing, in principle, to take part on the basis that an intervention could promote stability in the face of the disruption caused by the fiscal emergency in Athens.

In a statement yesterday, Trichet himself suggested as much. “I appreciate the commitment of euro area member states to take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area.”

The concern, however, is that even indirect ECB participation could be held to violate the anti-bailout clause if constructed as a loan in all but name from the Frankfurt-based bank. Crucial here is sweeping scope of the clause itself, which outlaws overdrafts “or any other” form of credit from the ECB.

The clause says: “Overdraft facilities or any other type of credit facility with the ECB or with the central banks of the member states (hereinafter referred to as ‘national central banks’) in favour of union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of member states shall be prohibited, as shall the purchase directly from them by the ECB or national central banks of debt instruments.”

It goes on to say that these conditions “shall not apply to publicly-owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the ECB as private credit institutions.”

This places very strict limits dealings between state-owned banks and the ECB, important in a scenario in which German state-owned lenders have been mooted as a possible conduit of bilateral loans to Greece.

Although various legal manoeuvres are under discussion, the overriding consideration is that EU leaders have no desire to reopen the treaty.

Bearing that in mind, it may well be that they have to proceed with a Greek intervention without any immediate ECB involvement.