Saving Greek’s economy - Rescue deal a huge test of solidarity

SO, here it is; a huge leap into the unknown to try to rescue the economy of a fellow EU member state destroyed by overspending and tax evasion.

The challenge should not be underestimated as the stability of the entire eurozone may be in question if the project does not succeed in the great majority of its aims. The EU has reached the most critical phase so far of the current global financial and economic crisis. Its — our — ability to manage its — our — economic affairs is facing its sternest test since the establishment of the single currency at least.

Around lunchtime yesterday EU president Herman Van Rompuy announced that a deal has been reached to help Greece cope with its deficit crisis. He emerged from intense negotiations in Brussels to say, alongside German chancellor Angela Merkel and French president Nicolas Sarkozy, that they were joining a full summit of EU leaders “to announce the deal that we have reached”.

“Euro area member states will take determined and co-ordinated action if needed to safeguard stability in the euro area as a whole. The Greek government has not requested any financial support,” Mr Van Rompuy announced.

Nevertheless, how Iceland would have enjoyed such support.

Just as the strength and solidarity of the EU supported our economy over the last two years, today, with that support, Greece can move from crisis mode to steady-as-she-goes mode. That, at least, is the theory and only time will tell if it is realised.

It is vital that whatever the practical application of yesterday’s announcement is it is effective and is seen to be so. If it is not the EU may have to come up with another plan and at that dreaded, hypothetical point Greece may not be the only EU economy unable to sustain itself. That would be the nightmare scenario.

Yesterday’s package must set targets as rigorous as anything the IMF might impose as it is important that the EU is seen to apply the firmness needed to solve its own problems.

On Wednesday, Greece was brought to a standstill by strikes. Like workers everywhere the Greeks deeply resent having their circumstances reduced “to resolve a crisis they did not cause”. Though the Greek government must reduce their deficit by 4% in just a year — never before achieved — public servants face nothing more rigorous than a wage freeze. Even though December’s budget was designed to cut our deficit by just 1.8% most Irish public servants would glady accept a pay-freeze option if they could.

Though the Irish crisis is far from resolved we can at least take a smidgen of comfort in the fact our Government, at the insistence of Brian Lenihan, introduced measures more proportionate to our challenge. They are divisive and represent considerable difficulty for many people, especially the lower paid and some welfare recipients, but they were a realistic step in re-establishing international and EU confidence in our ability to take the hard measures needed — the measures needed to avert a crisis like the one now faced by Greece.