G is for Gee! and not for Greece. It is the expression that we use to show bewilderment. And there is a great deal of bewilderment at what is happening with regard to the question of the fiscal deficit of Greece.
At the beginning of the week agreement seemed to have been reached between the governments of the countries of the eurozone and the International Monetary Fund on the type of support that is to be given to the government of Greece to meet its commitments and avoid on defaulting on its debt. Then mayhem seemed to have broken loose and hence this sense of bewilderment.
There is bewilderment about the strikes in Greece. We are all wondering why the Greeks cannot accept that they need to go through a period of austerity such that the fiscal deficit is reined in to sustainable levels. It would seem that it does not matter much to them if their government were to default on its loans. Neither does it seem to matter much to them that Greek government bonds have earned junk bond status. The problem has its roots in late 2009 when there were the parliamentary elections in that country.
At the time the incumbent right wing government had launched a fiscal programme which included a public pay and hiring freeze in order to start addressing the fiscal deficit that had reached double digit figures, but which no one really knew how big it was. The Socialist leader, George Papandreou, described this programme as being "unnecessarily austere" and made some expensive promises of higher wages, subsidised employment programmes and more spending on education. The end result of the election was that the Socialists won handsomely and were expected to deliver on the promises they made. Instead they have to cut spending and increase taxes. No wonder the Greeks feel cheated.
There is also bewilderment that the positive feeling about the bail out of Greece (because this is what it amounts to) lasted just 24 hours. Uncertainty about countries with high fiscal deficits such as Spain and Portugal was rife and the stock exchanges around the world lost ground. The losses registered in these last three days wiped out all the gains made since the beginning of the year. The value of the euro against the US dollar hit the lowest level in the last 12 months. Equities and currencies were once more subjected to speculation. Investors were left to wonder whether they will ever recover the wealth they lost since 2008.
Bewilderment was also shown at how slow the European Union was in reacting to the Greek crisis. One would have thought that the EU has enough resources to sustain Greece and that the principle of solidarity should have been enough to get the member states to agree on a rescue package. However, this was a different sort of crisis. The increased fiscal deficit was not the result of factors that were outside the control of the government of Greece. The more than doubling of the fiscal deficit from six per cent to 13 per cent as a percentage of the gross domestic product was the result of specific government policies in an election year. If the increase in the deficit was the result of a national catastrophe, help would have been more easily forthcoming.
Then there is also the point that the euro is not just the common currency of 16 states but it brings with it political ties that are stronger than we would have thought.
If an EU member state that is outside the eurozone were to face the same crisis as that faced by Greece, decisions on a rescue plan would have been taken in a shorter time. On the other hand the Greek crisis reflects a violation of the agreements that are at the basis of European integration and this explains why countries have withheld their support till the latest possible time.
The statement made by the German Chancellor, Angela Merkel, at the Bundestag on Wednesday can be described as historical and left everyone wondering what its effects could be. Mrs Merkel was very clear that any rescue package for Greece required German support. She then added that a lesson has been learnt from the Greek crisis. She claimed that the Stability Pact, which gave rise to the creation of the euro, needs to be amended such that it can no longer be violated.
The situation regarding Greece will continue to evolve in the coming days. However, we will remember it forever as balancing the government budget will no longer be a policy option - it will become the order of the day.