The euro area countries and notably the International Monetary Fund (IMF) did not sign blank cheques, but agreed to give highly conditional support. As the EU Council explained:
The very severe deterioration of the financial situation of the Greek Government has led euro area Member States to decide to provide stability support to Greece, with a view to safeguarding the financial stability of the euro area as a whole, in conjunction with multilateral assistance provided by the International Monetary Fund. Support provided by the euro area Member States will take the form of a pooling of bilateral loans, coordinated by the Commission. The lenders have decided that their support shall be conditional on Greece respecting this Decision. In particular, Greece is expected to carry out the measures specified in this Decision in accordance with the calendar set out herein.
I suggest that you read for yourself the Council Decision on fiscal surveillance and deficit reduction in Greece was published today in the Official Journal of the European Union (OJEU):
COUNCIL DECISION of 10 May 2010 addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit; OJEU 11.6.2010 L 145/6.
Conditionality expressis verbis
The four substantive Articles of the Council Decision spell out the narrow path the Greek government has to take to put an end to the excessive deficit situation.
It details the measures Greece has to take, as well as the deadlines, in express terms.
As I said, I suggest that you read the detailed Decision.
I am just going to offer you a few disjointed extracts to give you an inkling of the tenor:
Greece shall put an end to the present excessive deficit situation as rapidly as possible and, at the latest, by the deadline of 2014.
The adjustment path towards the correction of the excessive deficit shall aim to achieve a general government deficit not exceeding EUR ...
Greece shall adopt the following measures before the end of June 2010: ...
Greece shall adopt the following measures by the end of September 2010:
Greece shall adopt the following measures by the end of December 2010: …
Greece shall adopt the following measures by the end of March 2011: ...
Greece shall adopt the following measures by the end of June 2011: …
Greece shall adopt the following measures by the end of September 2011: ...
Greece shall adopt the following measures by the end of December 2011: …
Greece shall fully cooperate with the Commission and transmit without delay, upon a reasoned request from the latter, any data or document required in order to monitor compliance with this Decision.
Greece shall submit to the Council and the Commission a report outlining the policy measures taken to comply with this Decision on a quarterly basis.
The Greek government and the parliament have voluntarily undertaken their part of the rescue bargain, but it is a daunting challenge.
What is left of ‘sovereignty’, when a country has lost its capacity to cope on its own?
Conditionality is a big stick.