There are some wonderful ironies in the €110 billion rescue of Greece (for the time being).

The lame, in the shape of Ireland, Portugal and Spain, will have to contribute about €13 billion between them to help prop up the Zombie country, aka Greece.

Spain, third on the market’s list of worries, has to contribute €9.8 billion to the Greek bailout, Portugal, next on the list if the Greek bailout goes bad, about €1.9 billion.

Ireland, which has already chopped deeply into spending, and bailed out its banks in a combination of moves worth tens of billions of euros, will have to find €1.12 billion to help poor old Greece.

All three countries will have to either borrow the money and add it to national debt (55% in Spain’s case of GDP), or take it from their own budgets.

And, if either of the trio suffer a run or attack like Greece has suffered, you can bet that Greece will not be able to return the favour in any bailout.

Call it the other person’s problem, or the policy flick, or the politician’s side step.

The fact that three weak states have to pitch in to support the weakest, thereby weakening their own finances, shows the patched-up nature of the bailout announced Sunday, European time.

It is only good for three years and as pointed out yesterday, there’s no support for 2013 and 2014 when Greece’s debt will still be a crippling 144% of GDP, higher than it is now.

So wonder how Greece can conceivably survive a crippling debt burden higher in 2012 to 2014 than it is now, without more pain, more protests and a breakdown in social and political order.

It is impossible: reducing the budget deficit to 3% by 2014 (instead of 2012 as originally promised) does nothing to help Greece. The huge debt, probably closer to €350 billion  (from €273 billion today), will be just as burdensome then as it is now, more so in fact.

So the chances of a Greek default and or debt restructure have merely been pushed out three years or so, for someone else to worry about.

But yesterday saw perhaps the most important measure of all, more than the bailout package.

The European central bank last night, our time relaxed the restrictions it has on the quality of debt it will accept from financial institutions wanting to borrow money. The relation only applies to Greece and will ensure the country’s struggling banks are not cut off from credit, and will help keep a deeply recessed Greek economy alive.

It is a first for the ECB,  and has got bankers and others wondering if the next step will follow (or that the ECB will be forced to take the next move) in changing its rules to buy government debt, just as the Fed, Bank of Japan and the Bank of England have been doing during the recession.

That will require an enormous sea change in attitudes among the eurozone countries, especially Germany. But further worries in Greece, an attack on Portugal or Spain by speculators, or a dip back into recession, could all cause the change.

Desperate times bring desperate solutions: the bailout of Greece was a first (and the biggest for one country). Not for nothing did the FT last week label the sovereign debt crisis Europe’s subprime crisis.

Peter Fray

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