The on-going euro saga does not end with the announcement that the European Union will pony up US$146.2bn (£95bn) to help Greece stave off financial collapse. True, it does come in time to meet the deadline for the next round of debt repayment due May 19th, but it is hardly cause for wild jubilation. Keep in mind that there are still other PIIGS waiting for their own turn at the EU money trough, and if the Greek example is any indication, there will be far more loser than winners.
Looking at the rescue deal in more detail, it is evident that Greece will pay heavily to avoid bankruptcy. Civil servants and unions will be the first to feel the pain as the financing deal compels Greece to implement drastic expenditure cuts – to the tune of US$40 billion (£30bn) – over the next three years. The harshness of this deal is a direct signal to the aforementioned PIIGS and is intended to make it clear that any rescue plan financed by the EU (read Germany), will come at a price.
Next to feel the pain, will be Prime Minister George Papandreou and Greece’s socialist government. Outrage amongst the Greek citizenry is verging on the hysterical with left-leaning newspapers whipping the public into a frenzy. Voters will undoubtedly extract their revenge at the first opportunity.
“Our way of life, of working, consuming and organizing our lives in this part of the Balkans is finished since yesterday,†screamed the headline of one newspaper. What the editorial failed to mention however, is that the Greek “way of life†had long been financed on the availability of cheap credit. This was further exacerbated by a succession of governments pandering to a growing sense of entitlement, finally reaching the point where the status quo simply could not be sustained once the bills became due.
Proving further that there are no winners in this whole mess, German Chancellor Angela Merkel has been forced to maintain a precarious balance for weeks. While understanding fully the impact that the failure of a country within the Eurozone could have on the value of the euro and the overall economy of the region, Merkel was still faced with a backlash at home.
Having suffered through their own “austerity†program during the recession, there is little sympathy amongst German voters for Greece’s plight. Germany is expected to contribute more than a quarter of the total amount pledged, and this must be particularly galling in the face of growing evidence that Greece deliberately hid its true debt levels to avoid sanctions for failing to comply with EU standards.
