The outlines of a financial deal to save Greece from default have been publicized by the European Union. Despite confident anticipation in political spheres, many heave a great sigh of relief.

As time passed by it became ever more unrealistic to think Greece would manage on its own.
Rumours of proposals that were circulating – which have been discussed here as well – still upheld uncertainty, however. Who would take the lead, the Washington based IMF or a continent sure to stabilize the economy within its borders?

Thanks mainly to Germany – which in turn had full support herein by the Netherlands and Austria – Greece will be bailed out by both. Today the conditions will be set that Greece must meet in order to be eligible to receive loans from the IMF as well. To summarize how the burden is shared we need two numbers, the last of which is of course still an estimate. The first stems from the European Union, and it is 30 billion euros of aid money with an interest rate around 5%, the second pile of money will come from the IMF and might be as much as 15 billion.

The timing could hardly be postponed any longer. Fitch recently downgraded confidence in Greece’s debt to BBB-, resulting in soaring market interest rates up to 7.5%. Although this does little to improve matters for Greece, if anything probably the contrary, it must be seen as a consequence: The cause can be found in cutting the deficit by a third, as this aim means slashing costs and raising taxes so vigorously that it equals a staggering 4% of GDP.

With billions of debt maturing next month, that is not a pretty thought to have in mind, yet what other choices are there? None indeed, which is exactly why Europe bails Greece out while still stressing it does not. After all said and written, people know now that member states are not supposed to bail their neighbours out by virtue of their own laws. In a sense it is correct to say we must speak of loans here, since interest rates might not have been set by market demands, but they are still far from negligible.

Yet what other term is there to label a situation wherein other countries provide money to cure your nation’s economy? Development aid, perhaps. It is clear, though, that that is not what is happening. This can be spotted fairly easily if you glance at currency graphs. After the news spread, the euro appreciated in terms of both dollars and pounds. Take poor African countries into account and who will remain to argue development money gets results in that quickly?

Nevertheless, this is good news for Europe in political and economical terms. Issues like these easily divide countries into camps, as has happened between the more lenient Sakozy and the fiscal austere Merkel (without getting out of hand). Economically it hasn’t been bad for the continent as a whole: Greece’s problems slowed the European currency march, thereby improving export competitiveness, and the bail-out (or loans) will bring in money rather than waste it.

A little German devil is sure to have spoken on Merkel’s shoulder too: If there is any country having vast stakes in Greece making it through, then it would be hers. This is partly thanks to its export driven economy, but also due to the fact German banks hold relatively many Greek government bonds. No one wants a Trojan horse cutting Europe at its heels.

With this day almost over, we’re standing on the verge of more news. Updates will follow shortly.