We must help Greece or we' ll pay the price

Now that the Greek financial crisis has escalated to the point of threatening Greece’s membership in the Eurozone, Europe’s leaders and the US president have to lend their best effort to ensuring that the Greek bailout plan is effectively carried out. 

Otherwise, the Greek financial meltdown could spew devastating effects on the global economy. A failure to bail out Greece would shake investor confidence in the Eurozone’s financial markets because of the exposure of European banks to Greek bonds. It could also disrupt the American economic recovery because global economies have become intertwined.

The twists and turns of the past week sent ripples throughout the financial markets, underscoring their sensitivity to the latest developments in Greece.

Greek Prime Minister George Papandreou shocked the market early last week when he said he planned to call for a plebiscite on the US$178 billion rescue package, which was tied to deeper austerity measures. But on Thursday, Papandreou decided to abandon the plan to put the European rescue deal to a popular vote and opened emergency talks with his political opponents.

Talk of Greece dominated last week’s G-20 summit in Cannes. Although Greece is not an economic powerhouse, its fate could trigger a global recession. 

Already, Italian Prime Minister Silvio Berlusconi's government is struggling to come up with a credible plan to deal with its dangerously high deficits. Portuguese Prime Minister Pedro Passos Coelho wants to negotiate more flexible terms for the country’s $107.5-billion bailout plan. The Greek fallout could create a domino effect on the European continent.

The challenge facing Greek leaders is how to balance the interests of the Greek voters and the demands of Brussels, which wants to see the bailout plan running on track. The fall of Greece would not only affect its people but also jeopardise the integrity of the euro. 

German Chancellor Angela Merkel and French President Nicolas Sarkozy have put pressure on Greek leaders to fix the county’s financial problems. The growing exasperation of Europe’s larger economies with Greece’s failure to solve its economic crisis was reflected by a headline from the front page of Germany’s best-selling Bild newspaper last week that read, “Take the euro away from the Greeks”.

However, the Greek problem would not end with the larger economies cutting off Greece from their Eurozone club. Greece’s rehabilitation requires the support of not only the Greeks but also the Eurozone leaders, other world powerhouses as well as Greece’s creditors. Otherwise, Greece could be forced into a disorderly default.

The floating of a possible unity government to solve the Greek crisis came up, as Greeks badly need strong leadership to represent the country in the negotiations on the bailout with support from all stakeholders.

In the same fashion as the Thai government’s PR campaign soon after the 1997 financial crisis, the Greek government would have to communicate with the public to convince them of the necessity to bite the bullet to move the country forwards. But creditors and Eurozone leaders would also have to take into consideration the considerable distress of the public.

The bitter pill would not be easy to swallow but it is necessary to resolve the Greek economic crisis amid the fragility of the Eurozone’s finances. Letting Greece slide into bankruptcy is not a desirable scenario for anyone. World leaders should help Greece put its house back in order.