Greece is in the Eurozone. Therefore, it has more obligations to fulfill compared to other EU member countries. Particularly there are public budget and public debt restrictions Greece has to comply. However it appears that Greece failed to do so not only during the crisis but also before the crisis. What is more, recent news suggests that the country has undertaken some liabilities which have the potential to increase public debt in the future. EU has institutions responsible for inspecting the liabilities imposed on Greece for being in the Eurozone. However, they have missed this incident out...

Up to this point, there is nothing new. Now, put yourself in the place of the people carrying out transactions in markets. You hold a substantial amount of Greece government bonds. The value of these bonds will be maintained depending on the serious budget measures Greece will implement. If you are convinced by the seriousness of these measures, you will not sell Greece's bonds in panic. You will not think it is better to lose the saddle than the horse. In that case, both Greece and those holding the bonds will come out better off.

But, is not there a problem for you anyway? How will you be sure that the measures Greece implemented are serious and will be sustained and thus budget deficit and public debt will fall?  You have the right to be doubtful; Greece has been manipulating budget figures for years. What is more, the institutions to control the compliance of these figures with Eurozone legislation have missed this. Now, the former says 'I am now serious' and the other promises 'I will control their seriousness, do not worry.'

So, there is a problem here. EU is not willing for an IMF-based program to solve the problems particularly in the Eurozone. After all, IMF has nothing to say about the Eurozone monetary policy. Monetary policy is not specific to Greece; it applies for all the Eurozone countries. On the other hand, IMF can have a say on Greece's fiscal policy and ask some institutional reforms. But after all it is again EU's responsibility to ensure the compliance of the results of fiscal policies of member countries to the Eurozone legislation. Moreover, the institutional structure of the relevant countries is also set by the EU.

Therefore, EU has justified reasons not to desire a IMF-oriented program in the Eurozone. Nonetheless, that the reasons are understandable does not necessarily mean that that they are also righteous and they serve for the solution of the problem. However, Greece can move towards a solution under a serious program just as Turkey did in the aftermaths of the 2001 crisis.

Of course it is something else whether or not Greece can implement the program that will solve the problems. First of all, it will require substantial fiscal discipline. This cannot be done upon intention; the determination in this must be demonstrated as soon as possible. Moreover, Greece should be supported with fresh resources. Otherwise, due public debt of any amount will first lead to a tightness in the chest and then to a heart attack in Greece Treasury. There are some restrictions to the inflow of fresh funds from the EU. For instance, recent surveys reveal that public opinion in Germany is against such a method. What is more, EU is afraid that saving Greece will set a bad example for other 'naughty boys'.

There is no doubt that EU can on the one hand push for a highly serious budget policy and on the other hand design mechanisms to secure the sustainability of Greece's debt; it can purchase Greece's bonds through some certain methods. However, we again go back to the fundamental question: Who will prove that the budget is disciplined seriously?

In short, ambiguous statements for support by the EU and the steps for fiscal discipline Greece will take in good faith might not be enough. Given the need for fresh funds and for the confirmation of fiscal discipline, IMF appears to be the ideal solution. Let us see what the EU and Greece will decide. Unfortunately, we have no other option than waiting to see what happens. But if Greece does not enter the solution path, things can go chaotic with the involvement of Portugal and Spain though there is an option that will not lead to chaos. Let us hope for the best...

This commentary was published in Radikal daily on 18.02.2010