Greek Prime Minister George Papandreou won a vote of confidence in his nation’s parliament, but his party has only a handful of representatives to give it a majority. That does not matter for now. He has gotten enough support to negotiate with eurozone ministers and the IMF for a bailout. But, it is a Pyrrhic victory and hardly seems worth the effort.
Papandreou has argued that Greece has the means and the will to implement austerity programs to cut its deficit. Few people agree with him. PIMCO, the huge US bond investment firm, recently said Greece and other weak economies could not avoid default. It is, PIMCO said, the only way to cleanse Europe of sovereign debt obligations that many financially troubled countries cannot afford to repay.
There is eurozone support for Greece and perhaps much of its is self-interested. Many large banks based in the financially stronger nations have exposure to Greek debt. Almost all of them claim they have can survive a default, but no one outside the financial firms can confirm that.
Papandreou may be able to guarantee that the Greek government will bow to wishes of the eurozone and IMF to impose severe austerity measures. All of the interested parties know that laws are only as good as their enforcement. Greece cannot go door-to-door and company-to-company to collect taxes which have been unpaid for years. Austerity and high taxes may be regressive as far as future economic growth is concerned. That is rarely mentioned as the new economic rescue for Greece is put into place.
The will of Greece to implement austerity has been questioned often, but it is the key to the future of the success of any bailout.
Douglas A. McIntyre