Government of Greece Desperately Struggling to Avoid Bankruptcy

February 14, 2012

By: John Clark

Greek Prime Minister Lucas Papademos planned this week to restart talks with the political leaders who support his coalition government in hopes of cutting government spending in order to avoid entering bankruptcy, which could prove catastrophic for the struggling country.

Papademos is hoping to gain popular support for his proposed austerity measures, which would cut public benefits at a time of record unemployment and rising social unrest, according to a report from the Los Angeles Times on the collapsing Greek economy.

Creditors from around the world have raised loud cries for Greece to introduce widespread spending cuts, including wage cuts topping 20 percent and reductions to the pensions of public employees.

If Papademos is able to pass these measures—and his ability to do so is by no means a guarantee—the country’s international creditors have pledged to offer another bailout worth $170 billion.

Many observers believe that this bailout is the only thing standing between Greece and a total default on its debts, but passing such austerity measures could result in social unrest that could topple Papademos’ fragile regime.

Currently, the prime minister and his coalition government have agreed on some initial issues, but sources indicate that a serious deadlock has developed over how to apportion the estimated $4 billion in budget cuts that are on the table.

And, while Greek politicians engage in bitter disputes inside the country, leaders from other European countries have applied pressure on Papademos to pass widespread spending cuts in order to receive the much-needed bailout package created by the European Union and the International Monetary Fund.

The clock is indeed ticking for Papademos and his government, as there seems to be no other options for debt relief besides the painful spending cuts. One possible consequence of failing to pass the new austerity measures is alienating Greece’s partners in the Eurozone.

Of course, many Greeks might welcome this development, as a recent poll revealed that more than 50 percent of Greeks would prefer to leave their euro partners and adopt their own currency once again.

The next few weeks could dramatically alter Greece’s political fate, as the government wrestles with the ethical implications of trying to appease its international creditors by taking major spending cuts that could dramatically impact its own beleaguered citizens.