Greece: Who is being 'bailed out?'

Greek leaders thought they had fulfilled their side of the bargain, yesterday, hammering out 3bn euros in extra budget cuts to qualify for their next round of international loans.

But at the meeting of eurozone finance ministers on Thursday, frustration at Greek foot-dragging seems to have won the day.

Those same politicians have now been told they have three days to come up with a bit more budget pain. And they have to all promise (in blood?) that they will stick with the programme, no matter what the voters might say in April.

International bailouts - and the debt crises leading up to them - are always pretty painful to watch.

You wouldn't look very dignified either, jumping through hoops for your bank manager, with your back firmly against the wall (mixed metaphor intended).

This unedifying sight, George Osborne would say, is why you never want to borrow more than you can afford to repay - or lose the confidence of international investors. Leaders of countries who have been through it would all agree.

But the subjugation of the Greeks is starting to look extreme, even by these standards.

As Evan Davis put it, baldly, on the Today programme this morning, we focus on whether Greece can do what it takes to qualify for the 130bn-euro rescue, but the "real question" is whether they should be trying to qualify at all.

The shrinking economy certainly doesn't make the package any easier to sell. Nor do the public statements of their "rescuers" - notably Germany.

As I mentioned on Wednesday, Germany is so frustrated with the way the Greeks are handling their rescue funds, it wants to cut out the middle man.

When and if the next tranche of official cash is released, it wants all or most of it to go to a special account marked "for use only for international bondholders. Make available to Greek government only under advisement".

I paraphrase - but that is the basic idea. It all raises a question you hear a lot in Athens these days.

Its called the Greek "bailout" or the "Greek rescue package". But, who, exactly, is now being rescued?

Is it the Greeks? Or is it international investors - and the euro?

This, too, is a familiar theme in international financial crises. In a traditional IMF "bailout", a lot of the money lent to the country in trouble will almost inevitably flow right out again.

In a sense, that is what the rescue money is for: the country needs the IMF because it has a load of international obligations that, for one reason or another, it finds itself unable to meet.

The IMF steps in to help bridge the gap, while the country sorts out how to re-win the confidence of lenders, and live within its means.

So, it's always unpleasant for the country being rescued. And the "rescue" money often goes to bond investors rather than widows and orphans. The citizens of the country are still probably better off, than if they had been cut off from the global economy overnight.

But, again, in the Greek crisis it's all a lot more extreme - and the pros and cons, for the Greeks, are getting more complicated by the day.

German and French banks will lose from the proposed "voluntary" write-down of a large part of their Greek bond holdings. But they would lose even more from a disorderly default.

Likewise, eurozone ministers may be tempted to think that life would be easier for the area with a Greek default.

The way they see it, holding the Greek deal together is an almighty pain in the neck. That is perhaps the feeling reflected in last night's meeting.

But many wise heads in the financial markets would tell the Europeans to think long and hard about the potential fall-out from a default before they push Greece out the door.

Maybe all hell would not break loose if Greek defaulted now, as it might have done, for example, a couple of years ago. But given the amounts involved, from the European standpoint it's surely easier - and cheaper - to keep Greece onside.

Many would see the balance of arguments for Greece now shifting the other way. (For more on this see my blog: "Tables are turning on Greek debt deal".)

Sure, Greece would have a terrible time after a messy default. But then, the life they are signing up to under the terms of the deal is going to be pretty terrible too.

And if eurozone ministers get their way, it's a life that Greek voters are not going to be allowed to reject.