Greek rescue deal - Bailout will at least buy time for EU

Wednesday, February 22, 2012

Though it is impossible to overlook the terrible,impoverishing challenges facing the hard-pressed population of Greece, it would be dishonest to pretend that the €130 billion bailout package agreed by European finance ministers is not an occasion for some very moderate relief across the European Union.

It is as if a comrade in arms listed as missing in action and feared dead had been discovered alive but badly injured in a prisoner of war camp — things are bad but they could have been much worse. Hope, however faint, has a chance to eventually replace despair.

This remains the case even if you believe that the deal — and its myriad variables — is not the final solution to Greece’s, and ultimately Europe’s, crisis. It may just buy enough time to allow the rebuilding of the kind of stability other European countries need to continue to support the EU’s dysfunctional economies.

Had these tortuous efforts failed, had it proved impossible to finally reach some sort of arrangement to sustain Greek government finances, then the prospect of a Greek withdrawal from the single currency — or their expulsion — would have moved a step closer.

And, no matter what the criticism of the undoubted hardship the deal will impose on Greek lives, it still seems better to stay inside the euro tent and all the support that confers — even if it is now far more conditional than previously — than to have to re-establish a national currency and economy in the direst circumstances.

That would have been the unavoidable prospect facing Greece had negotiations collapsed. It is hard not to think that, in those circumstances, the street violence seen in Athens since this crisis began would be replaced by something far more dangerous and destructive. The impact of such a disaster on Greece and the wider European community can only be a matter for the most sober speculation.

The terms of the country’s second EU-IMF bailout are fraught with uncertainty and will leave that bruised country in Europe’s pending file for many months, if not years to come.

Few enough people believe it will prove the country’s salvation, especially as the authority of the country’s political class has been significantly downgraded. This is of particular importance as the country faces elections in a matter of weeks, and whomever is elected faces the awful prospect of imposing public sector and service cuts that make Ireland’s seem a passing frippery.

Whether they have the appetite or political capital needed to make these cuts remains to be seen and is another nagging question mark over the entire process.

It seems certain, however, that this deal is something approaching a last throw of the dice. This is underlined by the reality that the Greek government must implement all of the draconian reforms agreed under the first bailout package before a single cent of this week’s €130bn fund is paid.

The thumbscrews are being tightened but it seems that the noose has been avoided — for the moment at least. How long that remains the case is in a large part up to the people and next government of Greece, but the degree of empathy shown by the EU power brokers and the international financiers involved will be the deciding factors.

This appeared in the printed version of the Irish Examiner Wednesday, February 22, 2012