Guardian
Editorial
June 22, 2011
Seen from Brussels, Berlin or Frankfurt, the crisis playing out in Athens this month looks almost simple, and linear in its direction. The Greek prime minister, George Papandreou, wins a confidence vote, as he did on Tuesday night. The government gets MPs to approve its package of austerity measures, set for a vote next week. Then comes the next slug of cash from the IMF and the eurozone, plus the agreement of another massive loan, worth tens of billions of euros. This isn't easy, European policymakers admit: it requires adept political management, courage, and the ability to stay the course. But the alternatives don't bear thinking about: the first-ever default by a sovereign member of the European single currency, the possible toppling of the Greek banking system and other institutions around the world in a repeat of the panic that followed the collapse of Lehman Brothers in 2008 – and an existential threat to the entire European project.
Right on the risks, but wrong on the policy prescription. After a month of mass demonstrations in Greece, and the near-dissolution of the government last week, this takes too little account of reality, either domestic and political or international and economic. Not only has Mr Papandreou to get parliamentary approval for €28bn of spending cuts, tax increases and privatisations, he must begin implementing this draconian programme by 3 July, in time for the next extraordinary meeting of eurozone ministers. Even in ordinary times this would be regarded as ambitious, but to do so amid the worst recession the country has seen in four decades would require a miracle of collective discipline. The new finance minister, Evangelos Venizelos, has already tried to change the plan to answer a key grievance of protesters, by dropping an increase in fuel tax and a property tax, and trying to increase Greece's notoriously leaky tax take by targeting the self-employed.
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