At first sight, the Greek financial crisis poses serious problems for Greece, for the euro, and possibly for the status and standing of the European Union. The data are bleak. The GDP fell by 0.8 per cent in the last quarter of 2009, following slides of one, 0.3, and 0.5 per cent respectively in the previous three quarters; the government's own prediction of a 2010 slide of 0.3 per cent is widely considered an underestimate. The crisis has already had an impact, with the euro falling to $1.35 at one point, and all 16 eurozone countries face further falls through sales of the euro. The ratings agency Standard and Poor has downgraded the Greek sovereign debt. That makes the country's recent €2.5 billion three-month debt sale risky, as it implies Athens's lack of confidence in its own longer-term economic future. As for the EU, its rules allow bailouts only over specific projects, and it wants IMF help to be the last resort. France and Germany have expressed support, but privately accept that the eurozone might need to do more.

Closer analysis, however, shows a much more politically loaded picture. Prime Minister George Papandreou has pointed out that the crisis is largely the making of the previous conservative government. Secondly, the Chief Economist of the European Central Bank, Jürgen Stark, has confirmed that Athens manipulated economic statistics for years, which the EU's own monitoring procedures missed. Chancellor Angela Merkel's initial rejection of support for Athens may well have been motivated by the need not to alienate her coalition partner, the neoliberal Guido Westerwelle. The ideological issues involved are highly significant. The ratings agencies themselves gave major commercial banks top ratings just before those bodies collapsed in 2007-8. Finally, it must be remembered that other eurozone states and the international financial institutions may be acting as much out of ideological antipathy towards Greece's centre-left government as anything else. The IMF is notorious for ordering states to slash health and education spending as a precondition for loans. That would hit ordinary Greeks, among the worst paid workforces in the EU, very hard. Mr. Papandreou needs urgently to devise a workable and sustainable strategy to cope with these forces and factors.

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