Greece: Austerity Without A National Commitment

The IMF says it will not support future payments to Greece unless the government shows it has the will to pass more austerity measures. Eurozone finance ministers have already delayed a $17 billion payment. Prime Minister George Papandreou may lose a vote of confidence which would throw negotiations with Greece into chaos as a new government tries to form itself and define its approach to terms for a bailout package. That would take weeks that the southern European nation does not have.

Papandreou may hold together his own party and convince Parliament to pass draconian austerity measures on top of those already in place. This will probably include higher taxes, cuts to the salaries off government employees, and the sale of national assets.

Ultimately, it will not matter how the vote goes. Polls show 50% of Greeks do not approve of new austerity measures. Many continue regular demonstrations which sometime turn into riots.

Greece will have trouble collecting taxes from those who plan not to pay them. The government has done a poor job of this in the past. The parliament can also cut public employee wages. That will not stop these workers from further labor stoppages which often paralyze a transportation system which is critical to the large Greek tourist trade which is essential to GDP growth.

Austerity measures will also do nothing to create jobs, and high taxes on business may actually cause a drop in the number of gainfully employed Greeks.

Austerity means nothing when the basic rules and regulations which government uses to implement them are ignored. The IMF and eurozone finance ministers know that, so additional money given to Greece is no more than a bailout without the chance of future repayment.

Douglas A. McIntyre