The Greek Tragedy: EU/IMF approves €110 billion package

Gathering in an emergency session over the weekend, European finance ministers announced on Sunday an unprecedented, record €110 billion EU/IMF bailout package for Greece - and the Euro actually fell further.

Greece conceded to draconian austerity measures, the Eurozone members to €80 billion of loans (at a mere 5% interest), and the IMF to an additional €30 million (at 3%), all with the assurance that Greece's first €8.5 billion in financing needs for May 19 will be met. The total of €110 billion was in fact almost 4 times the initially imagined €30 billion amount, and EU leaders stressed that the sum is beyond what Greece will likely require. The size of the package was to serve as a silver bullet, a death knell to the calls of country default.

Yet, the announcement instead manifested itself in market consciousness as a series of further questions: Will the EU member states - namely, Germany - now be able to pass this final package through their individual Parliaments? Will Greece be able to keep its austerity promises without flooding its streets further with protesters? Will this whole ordeal repeat when Portugal or Spain's number is up?

Part of market hesitation originates in the stringency of Greece's promised austerity measures - a prerequisite Germany had placed in order for the debt-laden European country to secure a bailout. Greece has promised increases in VAT, raising retirement ages for public sector workers, new levys on businesses, and other steps to secure an additional €30 billion in fiscal savings through 2013. Budget cuts should slash Greece's deficit from 13.6% in 2009 to 8.1% in 2010. Unions have threatened further strikes to oppose the deal. Already, rioters in Athens have been throwing Molotov cocktails at police, protesting the "giant injustice" by the "European junta."

Greece had been forced to scurry for help this past Friday after Standard & Poor's downgraded its credit rating to "junk" status. Moody's also recently slashed its valuation of Greek debt and warned that further hits were on the way if Athens did not take more deficit reduction measures. Standard & Poor's has been on a rampage versus the larger part of the southern periphery of the European Monetary Union. The agency knocked Spain's credit rating down by one notch to AA from AA+ on Wednesday and stated its outlook was negative on the Iberian nation due to concerns over its budget deficit. This hit on Spain came just one day after the S&P slashed Greece's rating by three points as well as cut Portugal's rating by two levels.

Spain is announcing cuts in government administration with the hope of appeasing the markets and the rating agencies, and it seems a day doesn't pass without a Portuguese official publicly highlighting the differences between Greece's precarious situation and its own.

Now the passage of the package - and possibly the viability of the Euro - lies in the hands of the individual country leaders, who must put the bailout measure through their Parliaments. All eyes are on German Chancellor Angela Merkel, who, after everything from a pleading visit to Berlin by European Central Bank President Jean Claude Trichet to a personal phone call from Barak Obama this past Friday, will now need to gather her resolve to push through Germany's lion's share commitment of €22.3 billion of the bailout loans in the face of a crucial regional elections on May 9th.