Greeks vote for more economic pain

Story highlights

  • The Greek government has overcome two hurdles to qualify for the troika's austerity program
  • But in the spirit of a Greek tragedy, much political blood has been spilt along the way
  • The budget for 2013 makes for painful reading, including a contraction of 4.5% next year
  • But one thing is abundantly clear for Greece: The cash lifeline needs to be delivered

Over the course of five days, the Greek government -- led by the understated conservative Prime Minister Antonis Samaras -- overcame two high hurdles in a dash to qualify for the austerity program set out by the so-called troika, made up of the European Central Bank, the International Monetary Fund and the European Commission.

The first hurdle was the parliamentary vote last week, when the austerity measures were passed by just 153 votes out of 300. The second important vote took place in the wee hours of Sunday night in Athens, this time with a comfortable margin of victory as 167 of 300 lawmakers voted for, in essence, more austerity.

But in the spirit of a Greek tragedy, much political blood has been spilt along the way. Those who voted against the measures were tossed out of the coalition parties, while members of the Democratic Left abstained due to the labor reforms that were built into the overall plan.

This has been a very messy process, with the troika leaning on the relatively new government to deliver what Greece had promised before the current administration came to power following the elections last June. In large part, the restructuring is now there and Greece is telling the troika: "Show me the money."

The implicit agreement on the table: Greece delivers another $17 billion in cuts over two years from labor reforms and tops that off with a new 2013 budget. The troika then puts up the final instalment of $40 billion to avoid defaulting on bonds which start coming due November 16.

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But all of a sudden, there seems to be disagreement in the ranks and backlash from some eurozone member countries not happy with the measures. As one Greek CEO messaged me last night after our coverage of the vote: "We kept our side of the bargain; we need to see delivery from the other side too."

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The budget for 2013 makes for painful reading. A projected contraction of 4.5% next year and a record sixth year of recession, with the economy shrinking more than 30% in that time frame. Public debt to GDP is due to increase to 189%, having risen more than 50% since this whole crisis started. Unemployment last week hit a record 25.4% with youth unemployment leaping to 58%.

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    Another Greek executive I spoke with last night after the vote said the population has entered a new phase of acceptance. State workers have taken salary and pension cuts ranging from 15% to 40%, taxes on electric bills have soared, the retirement age has been bumped up to 67 years from 65 years.

    Finally, the real shrinking of the state sector is taking place. The state payroll will fall by 125,000 between 2012 and 2016 through attrition and real layoffs. Some of the special pay packages for certain ministries, such as the Ministry of Finance, have been eliminated and salaries have been capped. Some 40 senior employees at the Bank of Greece, the central bank, walked off the job for good in protest of the 5,000 euro salary cap.

    Change was a long time coming, but it has happened.

    This is a critical time. Some 70,000 workers took to the streets in central Greece last week for one last fight of resistance against the austerity. Samaras said it was a vote "for" or "against" the isolation of Greece.

    He was suggesting that Greeks will soon see the flickering light at the end of the tunnel, with the full backing of German Chancellor Angela Merkel after her recent, high profile public show of support in Athens. Political statements may be offered by the members of the eurozone this week, something the Greek technocratic Finance Minister Yiannis Stournaras promised.

    One thing is abundantly clear at this stage. For the state workers who have taken salary hits and for the one million private sector workers who have lost their jobs due to economic depression: The cash lifeline needs to be delivered.

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