November 8, 2012
In Greece, the basic script is easy: the parliament last night narrowly passed the latest austerity package.
Its passage should release further EU/IMF funding and allow the country to avoid bankruptcy.
The Greek Prime Minister, Antonis Samaras, spoke of putting a smile back on Greek faces. There are many reasons to be cautious, however.
- Greece is heading for its sixth year of recession
- the latest measures, which will see salaries and pensions cut, will only weaken the economy further - if the past is a guide
- the governing coalition is weak and fraying
- implementation will be difficult. One MP last night called on the people to "disobey the measures". The strikes and protests will continue
- the country's debt levels are unsustainable. Debt is expected to reach 190% of GDP next year. The target agreed by the IMF - 120% by 2020 - is out of reach
- Greece will almost certainly need some kind of refinancing and that will test the German taxpayers once more.
So the country that has seen its economy shrink by 23% remains on life support.