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STRICKEN: A man sells lottery tickets in front of a closed Eurobank branch during a 24-hour general strike on Feb. 24, 2010 in Athens, Greece. Greece ground to a halt as unions staged a one-day general strike in protest against government austerity measures designed to contain the massive public deficit. (Milos Bicanski/Getty images)
At just over 11 million, Greece’s population is sitting atop a financial time bomb that threatens all of Europe and beyond.
The looming prospect of a national debt default in Greece has been under the close watch of financial markets around the world, and for now at least, has been delayed. Greece’s Parliament voted in favor of a hard set of austerity measures on Wednesday. That warded off an immediate default, but offered no solution to Greece’s systemic financial problems.
The much-anticipated vote passed with 155 votes for and 138 against and makes way for a set of sweeping austerity measures worth 28 billion euros (US$40 billion).
Greek Parliament faces another vote on the implementation of the measures on Thursday. If accepted, Greece will receive the final installment of 12 billion euros (US$17 billion) of a total rescue package of 110 billion euros (US$160 billion).
“The danger of a disorderly default is off the table, at least for a little while,” says Barry Eichengreen, professor of economics and political science at the University of California.
But this does not mean Greece’s debt problems are resolved, says Eichengreen. “This problem is going to come back unless steps are taken by the European Union to help Greece with its recession, with its debt overhang problem, and with its restructuring.”
The austerity measures voted on encompass selling off some state owned enterprises and raising taxes. Greek-born Professor Emeritus Constantine Glezakos at the California State University Long Beach, believes Greece’s government will be unable to impose all of the austerity measures it just passed.
"There is no way for the Greek government to privatize all the firms they were asking for—the employees already started boycotting it. The telephone company, the electric company, and the transportation companies are all going to create havoc,” says Glezakos.But selling off assets won’t feed the starving root of Greece’s ineffective financial system.
“Greeks don’t pay taxes. For 40 years they have been used to this system. The tax system and the employees of the Greek [equivalent of the] IRS they get more income from bribes rather than from their salary. In my view, it will take at least two generations for Greeks to learn to pay taxes,” says professor Glezakos.
Greece’s debt currently totals 340 billion euros (US$490 billion), or around 160 percent of its gross domestic product. By comparison, the U.S. federal debt is expected to reach 70 percent of the gross domestic product by the end of this year.
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