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Dancing around Greece

Gavin Hewitt | 10:32 UK time, Tuesday, 16 March 2010

EU finance ministers in Brussels, 16 Mar 10Ancient Greeks believed that dancing was a gift from the Gods. In the crisis over the euro much of the dancing is being done by EU officials. They want to put in place a rescue plan for Greece but they dare not use its name - a "bail-out". So the tip-toe, the preferred step in Brussels.

Over the weekend officials had been briefing that a deal to help Greece was at hand. When, finally, the two key players emerged they hid behind obscure language. These were not revealers but disguisers.

What the EU Monetary Affairs Commissioner Olli Rehn and Eurogroup chief Jean-Claude Juncker actually said was that if it became necessary co-ordinated action would be taken to help Greece. Bilateral aid would be available.

The announcements were slipped in, tagged onto sentences because, even after weeks of discussions, any help brings with it a host of political and legal problems. The EU clings to the hope that Greece can rescue itself. Time and again it was stressed that Greece had not asked for financial aid. Athens's austerity plan was praised as "bold and ambitious". Jean-Claude Juncker went out of his way to say that he believed that the odd bilateral loan "won't be necessary".

So the game plan is this. The EU wants to signal to the markets that it has a plan, a "framework", a "facility" to help Greece if it can't service its debt. Even if it won't define what that plan is it hopes that the financial markets will respond favourably, and so lower the costs of Greece borrowing. If Greece has to pay less then it might just trim its budget by 4% this year on its own and the euro crisis eases.

To those who might want to know a little more about this plan there were few answers. Indeed, shortly after an Irish journalist cut to the chase and asked for details, the two key officials were heading for the exits. We don't know whether any sums have been pledged, we don't know what form this aid would come in. It seems it will be some kind of direct loans from individual governments. Rather than disclose the options we were told that some "technical points" had yet to be decided and that a final decision would be taken by the European Council at an undisclosed date.

It is a useful rule of thumb that when officials use deliberately vague language and scurry away from further questions then behind-the-scenes difficulties remain.

The biggest obstacle is the word "bail-out". If any rescue can be interpreted as a "bail-out" then it may breach EU rules and there could be legal challenges to it in Germany. So the trick is to launder the money in such a way that it appears as a series of direct bilateral loans from other eurozone governments.

It may work, but a line will have been crossed. In order to stave off defaulting a country using the euro will have needed rescuing. Other countries struggling with large deficits will take note.

Some of these contortions could have been avoided by turning to the IMF, but European pride rules that out. As Olli Rehn revealed, what is at stake here is something even more important than the health of a currency. "The euro is not only a monetary arrangement but a core political project of the European Union."

Much of the opaque language is there to disguise something else: divisions between France and Germany. The German Finance Minister, Wolfgang Schaeuble, unsettled everyone when he countenanced countries like Greece being forced out of the eurozone. "We need tighter rules," he said. "That means, in an extreme case, the possibility that a country that does not get its finances in order at all leaves the Eurogroup."

Then the French Finance Minister, Christine Lagarde, put the squeeze on Germany. She hinted that the crisis with the euro would be eased if Germans spent more. "Those with surpluses could do a little something," she said. Now this is no small thing. She is asking a country to deny its lessons of history, to relax its financial discipline and start consuming in order to help out weaker economies. It might prove a hard sell to a German public brought up on the horrors of hyper-inflation.

So for the moment, during the euro's gravest crisis, everyone is dancing and hoping that somehow the Greeks manage their deficit on their own.

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