Greek bailout - Appalling failure of governance

LIKE Ireland, Greece had no other choice than to swallow an unprecedented dose of unpalatable medicine to resolve an economic crisis that rocked the foundations of the EU.

Unlike Ireland, where draconian measures were introduced at an early stage, whatever one may feel about them, the Greek government has been dragged kicking and screaming to accept what amounts to the first ever bailout of a eurozone country.

Further similarities between the two nations include an appalling failure of governance. Here, the greedy policies of a Fianna Fáil-led administration contributed significantly to our economic woes. In Greece, the government deliberately concealed the true extent of its economic deficit.

For the hard-pressed Irish taxpayer, the bitter irony is that despite having to swallow harsh medicine, they will have to cough up half a billion euro as part of the €30 billion bailout for Greece by the 15 other eurozone economies, plus up to €15bn from the IMF.

With the Greek national debt now topping €300bn, to avoid bankruptcy it must bring back its deficit from 13.3% of GDP to 3% inside three years. To avoid going to predatory financial markets for further borrowings, Greece has been forced to agree similar funding over the following two years.

Predictably, the volatile Greeks have reacted violently to an austerity package that will increase VAT, fuel and alcohol taxes, and reduce public service salaries and pensions. That is not surprising in a nation where workers can retire at 53, where corruption is rampant, where tax inspectors are on the take, where bribery is rife in public and private business, and where daughters are entitled to get their father’s pension on his death.

While these tough measures will give Greece some breathing space, it is debatable whether or not the medicine will work. The big question is whether they will default on their debts and there is a widespread view that will happen.

The ramifications are enormous for peripheral countries like Portugal, Spain and Ireland that are teetering on the edge. Success is also vital for the sake of the euro and worldwide banking.

Politically, the repercussions are already having an impact on the elections in Germany. That underlines the need to rethink the structures surrounding the euro.

Financial ministers may need to hammer out a new treaty to underpin the future of the single currency. Otherwise, the world’s second currency could become a second-class currency, with all that implies for Europe’s future role on the global stage.

One thing is clear – there can be no question of Ireland leaving the euro currency.

Like Greece, the major problem confronting this country is public spending. While cuts are essential, it is unacceptable that they should hit low-paid workers and the most vulnerable in society while top civil servants and politicians are cushioned.

SIPTU general president Jack O’Connor describes the proposed agreement on public sector pay and reform as the best route to protecting public services and economic recovery. As he succinctly put it, the economic crisis is “potentially the most serious problem that had confronted this country since the Second World War”. That’s no exaggeration. It is time the public service unions faced reality.