It Won the Confidence Vote, but Greece's Government Still Has Everything to Lose

For Greek Prime Minister George Papandreou, winning the vote of confidence in Parliament was the easy part. His ruling Socialists hold a slim majority, and last week's cabinet reshuffle elevated party hardliners to keep rogue deputies in line. The vote, held just after midnight on Wednesday morning, passed 155 to 143.

Now, back to the hard part: Papandreou's embattled government resumes the deeply unpopular austerity program that's supposed to save Greece from defaulting on its massive national debt. Euro-zone leaders say the government must approve €28 billion of cuts, tax hikes, financial reforms and privatization in a June 28 vote before Greece receives the latest installment of bailout loans to allow it to keep paying off its debts.

Since last year, when Greece imposed a program of deep budget cuts and tax hikes in exchange for more than $150 billion in bailout loans from the European Union and International Monetary Fund (IMF), austerity has increasingly become a dirty word for many Greeks. "Austerity means unemployment, a dead economy and a 45% cut to my pension after I worked almost 40 years to get it," says Dimtrios Kountomerkos, a 58-year-old Athenian who retired from the Hellenic Air Force two years ago. "And still, after all these cuts, everyone says we're going to default again. What's the point?"

Kountomerkos and two of his friends were among the thousands who were waiting outside Parliament last night for the outcome of the vote. They drank beer and booed each time a deputy voted to support Papandreou's government. Most of the crowd was aligned with the aganaktizemenoi, the revolution-minded Greeks who have camped out for weeks in Syntagma Square across the street from Parliament. Modeled after Spain's young indignados, who protested their nation's own austerity cuts, the aganaktizemenoi represent the most visible revolt against Papandreou, whom they deride as a weak leader carrying out orders from international lenders instead of looking out for the Greek people. Many of these protesters are left-wing activists who oppose capitalism and blame banks for Greece's problems. They want to upend a political system they see as irrevocably broken, and call Papandreou's government a "junta" to associate it with the military dictatorship that ruled the country from 1967-74. It's a painful jab at Papandreou, who hails from Greece's most powerful family, which was chased out of the country by the military dictators.

The aganaktizemenoi may be using a dated template to create a fresh revolution, but they have mobilized Greeks who have been quietly stewing about the country's downward economic spiral. Yet, the Syntagma protesters offer no clear solutions on how to save Greece from its debt crisis, says Stathis Kalyvas, a political-science professor at Yale. "It's a protest movement, so they know what they're against, but what they are for is very fuzzy," he says. "But it's an important movement in that it makes 'political time,' which is usually glacial, move faster — and it's clear Greek politicians have to move much, much faster on this crisis."

To do so, the Socialists must, at the very least, stay unified. That's easier now that Papandreou has brought in Evangelos Venizelos as the new finance minister and deputy prime minister. Venizelos, a 54-year-old constitutional-law scholar and former defense minister, is a forceful politician who is both widely respected and feared. He is also the Prime Minister's longtime foe, having unsuccessfully challenged Papandreou in 2007 for leadership of the PASOK party. "Venizelos is considered a tough, serious guy," says Ioannis Tsarmougelis, an economics professor at the University of the Aegean. "He is someone who commands attention in the party."

Passing the latest austerity measures also looks easier now. The new measures include more cuts to public spending, as well as tax hikes and a privatization plan. One part of this privatization includes reducing Greece's holding in the state-run electricity company, the Public Power Corporation (PPC). The PPC's union, Genop, says the privatization will lead to higher rates for consumers at a time when they're finding it hard to pay their bills. Genop is protesting with 48 hours of rolling power cuts that began Tuesday.

The most controversial part of the new austerity package is the government's plan to trim the public sector by 150,000 workers. Many Greeks consider the public sector bloated and inefficient, but cutting it will cost the government dearly politically. For decades, both PASOK and the main opposition New Democracy party crammed the public sector with their cadres, regardless of their qualifications, as a way to curry favor with supporters. "It's been a no-go zone for politicians for years, but the public sector must be overhauled," says political analyst Dimitris Skalkos. "It's the first step to wean Greek politicians from their dependence on special interests, and it will also open up this economy."

The public-sector union, ADEDY, will join the private-sector union in a 48-hour strike next Monday and Tuesday, when Parliament is supposed to discuss and vote on the new fiscal measures. Meanwhile, the Syntagma protesters are vowing to stay in the square until new elections are called. They say public opinion is on their side: According to a survey by Kapa Research for To Vima newspaper, more than 47% of Greeks surveyed oppose new austerity measures and want early elections. Papandreou is vowing to finish his government's term, which ends in 2013.

Many analysts say Papandreou's government is doomed, and new elections are inevitable. But they also acknowledge that stability is crucial as markets and creditors watch Greece right now. The government is in talks with international lenders about a second bailout that could be as large as last year's package. The hard part, for Greece and for Europe, is far from over.