Wednesday, June 29, 2011

Greece escapes collapse, but its true problems are only just beginning

by Ian Bremmer

Financial Times

June 29, 2011

With today’s vote in favour of a medium term fiscal plan, Greece has just escaped the immediate danger of financial collapse. But this will prove a short lived victory for the Greek government: in the coming days and months a series of crucial decisions are pending which mean the prospect of both fiscal default and political crisis will rarely be far from the headlines.

Greek Prime Minister George Papandreou’s problems begin again tomorrow, with a second parliamentary vote on the implementation of the plan that was barely agreed today. This would create a new body to handle the planned €50bn privatisation drive, and a new package of tax hikes, including on those earning small salaries. A “solidarity tax” is also planned on everyone earning above €12,000 per year, along with higher taxes for consumers and businesses In short, it offers a little something for everyone to hate.

That said, tomorrow’s vote is likely to pass too. It seems unlikely that anyone voting for austerity today would undermine the good it might do for Greece by voting against implementation tomorrow. Yet while passing both votes is a considerable achievement, ongoing waves of public outrage and protest make it difficult to see how this plan can be faithfully and efficiently implemented.


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