A useful item by Tony Barber at the FT clarifies that the European Union’s legal structures do indeed provide authority for a potential bailout of the Greek government. The relevant language is contained in Article 122 of the Lisbon Treaty which states that if a member state ““is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council [of national governments], on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the member-state concerned.”
Exceptional occurrences beyond its control would be a bit of a stretch to describe the Greek situation, which is in large part self-inflicted, but the economic crisis is clearly exceptional. That, however, still leaves the question of politics. Governments of other cash-strapped countries — think Ireland and Spain — are going to wonder why Greece should get assistance that they’re denied simply in virtue of having had less responsible policies in the past. On the other hand, maybe the Greeks can put up collateral in the form of valuable antiquities or something.