While the Greek parliament approved the bitter medicine served to it by the coalition government of the technocrat Lucas Papademos, the streets were in flames. But even this sacrifice of new cutbacks will not suffice for the IMF and the EU to give the green light to the 130-billion-euro bailout that Greece needs to pay its debts. With Germany at their head, the EU states are demanding credible written proof that this time Greece will comply and not backpedal after the April elections. And it still remains to be seen where an additional 325 million euros will come from, on top of the 3.3 billion in cutbacks already demanded, given Greece’s refusal to reduce pensions.
Though the work of a minority, the violent demonstrations in Athens, unleashed while parliament was debating and voting, suggest that the Greeks’ capacity for further sacrifices is reaching a limit. This was also the view of 43 deputies who decided to vote against the new austerity package, and who were later expelled from their respective parties.
In fact the government won the parliamentary vote by 199 votes in favor, 74 against and 27 abstentions or absences. We shall soon see the impact of this extreme austerity on the elections, in which the centrist parties may lose a lot of seats to a range of extreme and populist forces.
However, any other result would have been a disaster for Greece, and for the European and world markets. Greece has no realistic choice but to take this road. In the short term, without the aid proceeding from the EU and the IMF, it would be obliged to declare itself bankrupt, and would surely enter into a far harsher recession, which would further aggravate existing tensions in Greek society. The road of withdrawal from the euro, which has been suggested in recent days by the German finance minister, Wolfgang Schäuble, is not really an option for the Greeks either, supposing that it were legally possible. As certain studies have pointed out, so drastic a step might involve the loss of as much as 50 percent of the country’s GDP, without any benefit at all to offset this brutal cost. Besides, it would break a taboo and set a precedent that would destabilize the whole of the euro zone, setting off a stampede of speculation tending to a withdrawal of Portugal and Ireland, and possibly even Spain and Italy.
But the reality is that Greece is going to be unable to comply, because the demands now weighing upon it aggravate the abyss of the recession into which it has fallen, which in turn deepens its deficit. What has been happening in the thoroughfares of Athens, thronged by some 100,000 demonstrators and devastated by violent groups who set fire to several buildings, reflects a dangerous estrangement between the street and the political world.
Greece fiddled its accounts and knows nothing of rigor in taxation. It requires a change of culture if it is to climb out of the morass in which it has placed itself and Europe. But such a change calls for time, leadership and understanding.