WILL THE EU TURN GREECE"S TRAGEDY INTO AN EXTREMELY EXPENSIVE FARCE? Bailout it is!

Since the beginning of the year, the international press recently has been reviewing ancient history and literature in order to find the right terms for describing the current situation that Greece is in. They seem to have settled for "tragedy". But what is happening now seems more like a farce. A farce which will be extremely costly for Europe.

After assuring us there was no "plan B" at first, the EU officials must have gotten the go-ahead from Germany to support Greece. Regardless of whether we"re talking about guarantees or direct bilateral loans, any proposed solution will also have to find a way to cheat the Maastricht Treaty, which prohibits financial aid for countries facing bankruptcy.

Article 122 of the Lisbon treaty shows that providing financial aid is only allowed in the case of severe troubles caused by natural calamities of exceptional situations which are beyond the control of the country affected by them. The threat of bankruptcy as a result of fiscal irresponsibility does not seem to be included in the exceptions of the treaty. So what next? Where there"s a will, there"s a way, even if it leads to the ruin of the European construction.

The rushed action, which was taken without a careful assessment of the medium and long term consequences, reflects once again the lack of vision and solutions of the Union. This is what former European Commissioner Günter Verheugen said in an interview for Der Spiegel magazine: "The EU has no vision of where we are heading".

Let"s not forget that the countries getting ready to rescue Greece are faced themselves with major fiscal imbalances and out of control public debt. Analysts of Bank of America/Merrill Lynch estimate that the Eurozone countries need 1.63 trillion Euros in financing for 2010 alone, and Morgan Stanley states that the financing need of the US is USD 1.7 trillion.

This situation caused Jim Reid, an economist with Deutsche Bank in London, to say that "the problems currently faced by peripheral Europe could be a dress rehearsal for what the U.S. and U.K. may face further down the road", even though the headlines of the financial media seem to focus exclusively on countries known as PIIGS (Portugal, Ireland, Italy, Greece and Spain).

Whereas Greece needs around EUR 50 billion in 2010, Germany needs 340 billion, France needs more than 370 and Italy needs more than 320. How can borrowing costs not increase when this kind of amounts are needed? It"s unlikely, as shown by the drop in prices for German bonds after the first rumors about the plan to rescue Greece emerged.

Where will European governments raise the needed funding from, as they will be caught in a fierce struggle with banks looking to raise capital themselves? According to an article in El Mundo quoted by Bloomberg, in Spain, which needs to refinance "just" 205 billion Euros, the Central Bank has just asked banks to lower the value of their real-estate assets by 20% this year.

The markets are totally confused, at least for now, after German officials said they would pressure Greece to cut spending, and the announcement of the bailout plan will be put delayed.

But Greece"s problems don"t end here. In a recent article published by Der Spiegel, it is said that American bank Goldman Sachs helped the Greek government cover up the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules". Unfortunately for Greece, those debts weren"t pushed far enough into the future.

The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005, according to the article, which means that that future may soon turn into a gloomy present.

In spring last year, the authors of the animated series South Park made an episode which described the "scientific method" for saving financial companies facing troubles. When the alarm would ring in the headquarters of the US Treasuries, authorities would cut off the head of a chicken and let it "choose" the optimum solution in a closed ring. The outcome? Bailout it is!

Will the European authorities resort to the same solution? Or will they interpret the rise of financing costs for Germany the right way and will leave the fiscally irresponsible learn what frugality is? It is hard to believe that we are going to see anyone sacrificing their political career for this goal, noble and absolutely needed for overcoming the crisis though it may be.