The Greek issue looked to have been done and dusted after a mechanism was agreed on during the last EU summit – but it doesn’t seem to be the case.

EU nations had agreed on a financial guarantee to back Athens up in case of default. The package was to be financed by the EU with the International Monetary Fund.

To put it into perspective, the package was only meant as a guarantee and Greece never asked for money in its pocket. In fact, any money transferred to Greece (in the eventuality of default) was to take the form of commercial loans which would be paid back with interest.

Greece is currently grappling with a ballooning deficit and is seeking to refinance soon to mature loans. It had sought the guarantee of loans in an effort to push down borrowing costs on the commercial market.

The cash-strapped nation was borrowing money at rates of 6.5 per cent, whereas the normal rate is in the region of 4.5 per cent.

The deal was hammered out late at night during discussions which primarily revolved around France and Germany and everyone went home happy. So happy, in fact, that the issues of contagion and possible default by other eurozone nations such as Spain and Portugal were not even discussed.

At the time, this newspaper had said that it could not understand how these issues were not addressed at the said summit, but Europe’s politician’s seemed happy, as did Greek President George Papandreou who finally got his ‘loaded gun’, as he put it.

But something, somewhere, did not quite go to plan. The plan was to lower the interest rates at which Greece borrows money on the commercial markets – in the sense that with a financial guarantee in place in case of default, the country would not be deemed a risk client.

The safety mechanism has not worked. It is now two weeks since it was agreed, yet Greek borrowing rates have increased beyond the 6.5 per cent rate to something approaching the seven per cent mark. Clearly, the package was either put in place when it was too late, or Greece has already gone beyond the threshold, like a ship which has been holed below the water line and cannot recover as too many bulkheads have flooded.

The EU and the IMF must get their heads together and sort this out before it gets too late. As we have already mentioned time and time again, if Greece falls, we all fall – as simple as that.

In order to stop the rot, the EU, particularly leaders of eurozone countries, need to get together around the table and find a more efficient solution to the problem. If Greece continues to borrow money at these rates to pay off its existing debts, it will end up increasing its deficit rather than decreasing it. Economic suicide when implementing drastic austerity measures with a deficit of almost 13 per cent of gross domestic product.

If Greece does eventually default, then fears about Spain and Portugal could spark off a lenders’ confidence crisis, in the sense that confidence in the euro would be so weakened, that the rates afforded to other countries (including Malta) would be at such a high premium that we would be preparing our own deathbed. The same, of course, holds true for all other eurozone nations. It seems that lenders want to see the exact clauses, sub clauses and details of the Greek ‘bailout’ plan before considering changing tack. Our advice is, do it, and do it before it’s too late. If the plan is not as watertight as originally thought, redraft it!