By Dale McFeatters
Scripps Howard News Service
Greece has received a distinction it sought but certainly would have rather done without. It is the recipient of the largest bailout in economic history, 110 billion euros, or more than $145 billion, eclipsing the previous record of $58 billion to rescue South Korea in 1997 during the Asian crisis.
The bailout will enable Greece to redeem billions in government debt obligations that come due May 19, thus avoiding default and almost certain economic collapse. The bailout also buys Greece three years, the life of the loans, to get its financial house in order after years of concealing the amount of its deficits.
The 16 eurozone nations seemed reasonably confident that the Greek ``contagion" would not spread and that Greece was a special case because, as the French finance minister delicately put it, the Greek government reported ``special numbers, funny statistics."
In return for the bailout, Greece has agreed to $40 billion in budget cuts and tax increases, equivalent to 13 percent of its GDP. And it is likely to endure two more years of recession with its economy projected to shrink 4 percent this year and 2.6 percent next year.
The eurozone nations had known since at least mid-February that a bailout was in the offing, but it came about only Sunday when Chancellor Angela Merkel finally agreed that Germany would pick up just over a fourth of the cost. The bailout is unpopular in Germany where the popular view is that the German taxpayer is getting stuck with the tab for Greek irresponsibility.
The bailout, with its harsh austerity measures, is also intensely unpopular with a large part of the Greek public, which has staged violent protests and called for general strikes.
Some of the cutbacks give a good indication of how Greece got into this fix in the first place. The government plans to increase the average retirement age from 53 to 67. It will impose a three-year wage freeze on the public sector, which accounts for a third of the workforce. And government workers will lose annual bonuses of an extra two months' pay.
There will also be a 10 percent increase in the taxes on alcohol, tobacco and fuel and a 2 percent increase, to 23 percent, in the national sales tax.
The bailout was done belatedly and grudgingly, but, like the U.S. bank and car-company bailouts, it had to be done. If the contagion had spread to other high-debt, high-deficit eurozone countries like Portugal, Spain and even Italy, the ultimate tab to set matters right could have been as high as $650 billion.
A meltdown of that magnitude could have meant the end of one of Europe's great postwar successes, the euro itself.
Dale McFeatters is an editorial writer of Scripps Howard News Service (www.scrippsnews.com).