WHAT has become abundantly clear at the weekend is that the rescue packages offered to Greece over the past two years have failed to yield the required results.

There's nothing more that I can possibly draw from the poll results in that country, which place politicians at the helm who are more than likely to reject the second bail-out package because of the onerous austerity measures.

The ousting of French President Nicolas Sarkozy has been seen as the outright rejection of austerity; in Greece even more so. French Socialist Francois Hollande is considered a pragmatist and while he has trumpeted growth over austerity, the purse he will soon inherit will make it quite difficult to achieve without structural reforms.

The sweeping changes in France and Greece follow the fall of governments in Ireland, Portugal, Slovakia, Italy, Spain and, most recently, the Netherlands.

Of all the collapses, the most worrying is Greece. The signatories to the bail-out agreements have been swept aside in favour of a host of parties that are likely to reject those commitments made to the European Union, the European Central Bank and the International Monetary Fund.

While Greece may be small, representing about 2% of euro-zone gross domestic product, its fate is tied to that of the common monetary union more than most. It's the case study upon which any future survival of the euro will be based.

And without political support, the Greek rescue mission has to be considered to be over. It would be fine, given its size, but when one considers how much Europe has spent in trying to keep the nation afloat and in the 17-member euro zone, its failure will be costly. And not just in terms of lost money, which those against austerity will no doubt argue could have been better used to fund growth.

Greece's first bail-out cost Europe about ?53bn, the second about ?40bn, a ?93bn (R948bn) total tab. If, or rather when, the country exits the monetary union, the region's central bank stands to lose about ?40bn, and about ?70bn more because of its exposure to Greek banks. Overall, that's about ?200bn Europe will have to one day write off in what is now seemingly inevitable, a Greek exit. There are other, as yet unquantifiable, costs of an exit to the economy, too ghastly to contemplate.

Greece now faces a 50%-75% likelihood of leaving the common monetary union in the next year to 18 months, Citigroup economists wrote in a report on Monday. Previously they had estimated the risk of an exit at 50%.

German Chancellor Angela Merkel's efforts over the past two years are to blame. I can't see anyone in her ruling coalition being too happy, especially if she has to put a new bail-out plan before them.

Spain, the fourth-biggest economy, is sitting on the cusp. The index of 35 of its most liquid stocks is down more than 15% this year and trading at 2009 lows.

Will the German taxpayer be amenable, no matter the importance of a Spain or an Italy, to another rescue mission? And if they are (given the importance of the euro zone to Germany's economic health) what degree of sovereignty would need to be forsaken by the beneficiary?

It's going to prove a lot more difficult for Ms Merkel to reach consensus in favour of another bail-out, no matter for which country.

SOMETIMES it's over the top and for all to see, but most of the time it's a lot more subtle, but there's definitely something of a currency war in global markets. We just aren't the main players, nor can we afford to be, in all honesty.

I'll argue that combined with the two rounds of quantitative easing and its promise to keep rates at record lows till mid-2014, the US Federal Reserve is the leading player in this war against the growing manufacturing base it sees in China and neighbouring countries such as Vietnam.

Joseph Stiglitz, the Columbia University professor who won the 2001 Nobel prize for economics, says SA and other emerging markets should also act to make their currencies more competitive, to spur growth and create jobs.

Playing that game through the accumulation of foreign reserves is an expensive one, and do we have the muscle to influence the battle?

According to Bloomberg, South Africa had $50,7 bn in gross gold and foreign currency reserves at the end of March, less than economies such as Thailand, which is of a similar size but has $179 bn in reserves.

As to what degree the Reserve Bank can influence what's become one of the most liquid emerging market currencies in the world, I would suggest very little.

derbyr@bdfm.co.za

Twitter: @ronderby