How Greece can stave off collapse

Protesters in Syntagma Square, 22 June 2011
Image caption Many of the protesters have been normal citizens - not anarchists

There was a cartoon in a Greek newspaper this week that showed a partially hidden hand pointing a large gun at the head of a man with a face full of resignation.

"Austerity plan or bankruptcy?" he is asked.

"Just shoot," he says.

It is true that it is hard to find a good option for Greece at the moment. But such fatalism is not yet taking hold.

Greeks are still prepared to fight.

Forget for a moment the violent protests of a hard core determined to cause trouble. Petrol bombs and tear gas outside parliament understandably tend to make headlines.

But it is the quiet anger of much larger numbers of people, who have already seen their living standards fall dramatically, which is of greater long-term significance.

"We can't just lay down and die," said a woman named Eva, standing on Syntagma Square in the early hours of the morning with a small group of friends. "We have to come here to say this plan is wrong. It's not helping."

And that is the problem for the policy wonks and the politicians.

Public legitimacy has to be part of the process.

The protesters on the streets were not just anarchists in black T-shirts and communists carrying red flags.

They were small-businessmen and women; they were lower middle-class professionals; they were disarmingly normal.

There may be greater understanding now that an immediate default in Greece would be chaotic, and possibly as catastrophic as the Prime Minister George Papandreou warns.

But both Greek and European leaders need to make more effort to persuade people that even if the tunnel is long and dark, there is some kind of light at the end of it.

Rolling confrontations?

Several things were confirmed this week.

  • The Greek government has, for now, a narrow majority in parliament for pushing ahead with its austerity plans - mainly on the basis that the alternatives would be even worse.
  • A large section of the Greek people are close to the limit of what they are prepared to withstand. And that's even before any of the new measures kick in. Expect further protests.
  • European leaders are worried sick and occasionally prone to statements that sound rather too much like panic for comfort. They are working hard on much longer-term finance for Greece, but no-one has a magic wand.
  • And the markets? Well they clearly believe that Greece will eventually default on its debts, there is no way they can all be repaid. This is all about buying time, and shoring up defences.

So where does Greece go from here?

Let's assume that international financial backing continues.

Every three months inspectors from the EU and the International Monetary Fund (IMF) will arrive to review progress in implementing austerity and economic restructuring.

And why not? It is, after all, their money. But it feels like a recipe for a series of rolling confrontations - a debilitating process.

Perhaps if Greece's two main political parties could have buried their differences when this crisis was beginning 18 months ago, far more progress could have been made.

"They could have jointly decided to depoliticise the public sector," says John Psaropoulos, who edited the Athens News for 10 years.

"There could have been consensus on how many civil servants to dismiss and which parts of utility companies to streamline or privatise."

"Now it's all being done on the basis of a diktat imposed from outside, and that is what is causing confrontation."

Little wonder then that one of Christine Lagarde's first public comments after being confirmed as the new head of the IMF was an appeal for greater political unity in Greece.

It would immediately give the country more credibility abroad, and a broader base of support at home for implementing reforms that will continue to be opposed by many of the country's 800,000 public employees.

It could also produce more bargaining power to argue that the balance between enforcing austerity and encouraging growth needs to be tweaked a bit.

So after a difficult and dramatic couple of weeks in Greece - with knife-edge parliamentary votes, strikes, protests, riots and dire warnings from all and sundry - that is my prediction: some kind of national unity government within the next 12 months.

It may be the only way that all this can possibly work.