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Greece crisis fallout: Will Greeks step up riots over austerity measures?

But with the country on the verge of bankruptcy, leaders have had little choice but to put themselves in the hands of Europe and the International Monetary Fund.
After three months of tense negotiations, Greece’s eurozone partners and the IMF this weekend agreed to a $146 billion bailout to prevent the Greece crisis from crippling economies throughout Europe. But in return, the country’s leaders have been forced to implement a harsh austerity program that will include deep cuts to pensions and civil servant pay, as well as increased taxes.

“I would like to make it absolutely clear to everybody. I have done and will always do whatever it takes for the country not to go bankrupt,” Greece’s Prime Minister George Papandreou told an emergency meeting of cabinet Sunday, calling on the Greek people to make sacrifices in order to preserve the country’s future.

Europe's cultural differences highlighted

European nations agreed to the rescue as much to save the euro as to save Greece. But the crisis has highlighted deep cultural differences among the eurozone’s members and shaken faith in the common currency, used by 16 of the European Union’s members. Frugal Germans initially balked at bailing out what they see as spendthrift Greeks.

“This is also in Germany’s self-interest to come to the assistance of Greece, in the wider interest of assisting security in the euro zone,” says Jens Bastian, a German political economist with the Hellenic Foundation for European and Foreign Policy (ELIAMEP), who was in Berlin last week when the German government was debating whether to go ahead with the bailout. But he says the program’s success depends on Greece. “The package is conditional on whether Greece can deliver on the home front over the coming three years.”

Greece's woes

The problems that brought Greece to the edge of this precipice are not new. The country’s culture of corruption and nepotism, its bloated state and its faulty statistics are the work of decades. But during the boom times, when European economies were growing, little attention was paid to the structural deficiencies of Greece and other euro zone countries.

This rescue package may give Greece some space to tackle its problems, but success is not assured.

The bailout will allow Greece to repay about $11.3 billion worth of debt due by May 19. Additionally, cuts to state spending will help bring Greece's deficit under control, but the country’s long-term future depends on whether the government can reduce waste, improve bureaucratic efficiency, and clean up its culture of corruption. As part of the deal with the IMF, Greece has pledged reform, but making good on those promises will require a dramatic shift in state culture.

Some fear the austerity measures could exacerbate the country’s problems by sending it spiraling deeper into recession.


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