If you have not heard, Papandreou got his vote of confidence last night. Really folks, does anyone truly have confidence he can pull this off. The markets were up yesterday on the prospect of this happening, but now that it has happened they are pretty lackluster today. Perhaps this is because the vote of confidence is not the final say even for this go around of EU/IMF support (bailout). Greece still has some tough austerity issues to pass in the next week. I agree it seems likely these will pass now, but the protests in Greece continue and passage is not a sure thing. Either way, passage just buys more time and pain.
Hark back to last year when a package of austerity measures were passed to get the initial bailout package. Unemployment in Greece was a mere 11.6%. It now stand at 16.2% and this decline is in large part due to the austerity measures. Now Greece is going to compound this with further austerity measures, which undoubtedly will worsen an already very weak economy and employment picture. Add to that no reduction in debt, the bailout being lent a relatively hefty interest rates (albeit far below what they could get otherwise) and the need for a lot more bailout money next year and you have a real mess on your hands. The only good news I have read is that the new austerity measures include a crack down on tax cheats in Greece, where cheating on taxes seems to be a national past time for the rich.
Things will undoubtedly get much more dire in Greece before they get better and this can will easily need to be kicked for a good 5-10 years for a default to be avoided. I have a nagging sense that neither the voters in Greece nor the voters in France or Germany are likely to have the appetite for it going on that long. Frankly, no one does.
Disclosures: None (though I do have a Greek friend)
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