The Greek crisis further deteriorated with thousands of angry demonstrators encircling the Greek Parliament. With a slender parliamentary majority and massive popular discontent, Greek Prime Minister George Papandreou held talks with the New Democracy opposition in a bid to form a coalition government.
Papandreou was prepared to tender his resignation and that of his finance minister to facilitate the formation of such a government. While the situation remains fluid and could change within a few hours, the two responses that Papandreou received from opposition leader Antonis Samiris illustrate why Greece is worse off than the two other European bailout recipients - Ireland and Portugal.
Portugal is perhaps the best off because the three major parties have agreed on seeing through the austerity measures. Additionally, Portugal has just been through an election, providing a mandate for the victors. If there will be trouble, it will come later, if the austerity measures fail to produce the desired results and merely compound the economic misery.
Ireland has come through an election that has also produced a stable coalition. The new Irish government has the advantage of saddling the blame for the economic meltdown as well as the assumption of the bailout on the former government. Its only exposure is a campaign pledge to renegotiate the terms of the bailout agreement, but it can claim that it inherited both the mess and the extrication terms prior to assuming office.
In the Greek economic tragedy, the economic difficulties can be viewed as the responsibility of both the ruling Socialists and New Democracy. The economic downturn began on the latter's watch. Papandreou will get more of the blame for austerity. However, given the divisions within Greece, it is doubtful that elections could produce a clear-cut majority and stable government.
New Democracy has so far offered Papandreou two options: He can resign and allow the formation of a government of technocrats or he can have New Democracy join a coalition government with the proviso that it renegotiates the terms of the bailout with the EU and the IMF.
The idea of a government of technocrats is outwardly appealing, because it spares the politicians the onus of administering the bitter austerity medicine. After the worst is over, the technocrats could presumably go back to being technocrats; politicians would be irretrievably ruined. However, unless they were operating under some form of emergency status, what would give the technocrats the political weight to face down demonstrators, unions and other opponents of the austerity measures?
The proposal to renegotiate the bailout agreement is also a nonstarter. Greece needs the next installment of assistance immediately. Renegotiations would be lengthy and would certainly arouse resistance within those EU countries who would be called upon to furnish the money. The only consolation is that the Greek credit rating is so bad that it cannot aggravate still further.