The proposed €110 billion ($140 billion) Greek rescue package announced on Sunday may well not survive the week. Watching public sector workers storming the Acropolis in protest at proposed government spending cuts and tax increases, raises the question of whether the Greek Government itself can survive.
Eurozone countries have agreed to provide €80 billion in emergency loans over the next three years for Greece, with the rest coming from the IMF. In exchange for avoiding bankruptcy (at least for the next couple of months), Greece has agreed to pass a series of austerity measures and reduce its budget deficit by more than 10 percent. The Greek parliament will vote this Friday on a series of measures including a three-year public sector pay freeze, a VAT increase and increasing women’s retirement age. Communists and Trade Unionists are behind tomorrow’s planned general strike, following several demonstrations which have already taken place.
As the Eurozone’s largest economy, Germany will be writing Greece its largest European check, to the tune of €22.5 billion dollars ($29 billion). The Bundestag will vote on the proposal this Friday, although a visceral public backlash is already being felt. Berliners are mightily upset to see their hard-earned Euros pressed into Greek hands so easily, having tightened their belts in recent years. Besides which, it was just a few months ago that Chancellor Merkel was lecturing Americans, “you can’t live beyond your means,” following the collapse of Lehman Brothers, when that’s exactly what the Greeks have been doing for years.
The folly of the single European currency is now coming to fruition too. When Greece joined the Euro in 2001, it was quite clear that the criteria had been fudged to satisfy the political expediency of simply adding new members. Sound economics simply took a flyer, as EU elites created a political currency absent any sound fiscal basis. France led the way for Eurozone members, one-by-one, to breach the woefully-misnamed “Stability and Growth Pact,” as countries like Greece have willfully raised their budget deficits and grown their public debt. EU leaders have no one but themselves to blame for the entirely predictable crisis the Euro finds itself in today.