One year ago, the Greek economy was bailed out to the tune of 111 billion euros. Now the country is back for more. Jean-Claude Juncker, the chairman of the Eurozone finance ministers, said that “Greece needs a further adjustment program.” What he actually meant was that Greece has not taken the hard decisions necessary to convince the markets that it is serious about restoring the integrity of its public finances. Standard and Poor’s, the credit rating agency, cut the country’s bond grade to junk status.
Any bailout looks certain to require a contribution from the United Kingdom, even though we are not part of the Eurozone. It will not be the first time we have suffered such unfair treatment, thanks to the last government’s decision to sign the U.K. up to the bail-out mechanism. We have already contributed 7 billion euros to Ireland’s rescue and are liable for up to 6 billion euros to shore up Portugal. This exceeds the total savings so far made in our own deficit-cutting program.
There are now fears that the contagion may spread to Spain, the Eurozone’s fourth largest economy. Were that to happen, it is hard to see the euro surviving in its present form. Indeed, there were rumors — robustly denied — that Greece was considering withdrawal from the single currency to allow it to devalue its way out of trouble. That this was even mooted is significant; it reveals just how nervous the markets are. In reality, it is Germany that will decide Greece’s fate. Germany announced the best export performance in its history, yet it continues to see its exemplary economic discipline being taken advantage of by an indigent Greece. At what point will the German taxpayer decide enough is enough?
The Telegraph, London (May 12)