Those talks are proceeding and — it is hoped — will be completed in September along with an agreement by major banks and financial institutions that hold Greek bonds to leave much of their money invested in the country.
But even if all that happens on schedule, it is only the beginning of a struggle that has the potential to disrupt the global economy for months or even years as Greece faces a grueling series of battles over how to enforce new tax and other policies, reorganize its economy, and work its way out of mountainous public debt that is still accumulating.
The new measures will touch the lives of almost every Greek citizen through higher income taxes, tougher tax enforcement and fewer government services. They also will force a major showdown between the ruling party of Prime Minister George Papandreou and the country’s well-connected public unions and state-owned companies — the start of which could be witnessed in the tear gas and rocks flying between police and demonstrators as the Parliament met.
At the center of the financial plan the Parliament approved Wednesday is $70 billion to be raised by privatizing state assets, including major companies that generate electricity, run trains and employ tens of thousands of people. It amounts to a virtual rewiring of the country’s patronage-based politics, and Greek and other analysts expect intense political combat over each deal as the unions and well-connected bureaucrats at state-owned companies try to preserve their jobs and influence.
Failure to follow through, however, would put at risk the expected flow of help from the International Monetary Fund and euro zone countries.
The plan “has to be implemented, and it contains very specific benchmarks” that the IMF and European officials will be monitoring, IMF Acting Managing Director John Lipsky said in a CNBC interview. “It involves important structural reforms to eliminate the crippling inefficiencies in the Greek economy. . . . They have to do better.”
Wednesday’s parliamentary vote was being closely monitored around the world as the possible spark of a broadening economic crisis. In the United States, the Dow Jones industrial average rose 0.6 percent to end at 12,261 after the austerity plan was approved. The S&P 500, a broader measure of stocks, jumped more than 0.8 percent.
Greek lawmakers needed to pass the proposal, including the privatization plans and an additional $40 billion in tax increases and spending cuts, for the IMF and a group of European countries to release $17 billion in emergency loans that Greece needs to pay its immediate bills.
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