Political unity? Good luck, Greece

 

The Greek finance minister says political unity is needed for his country to execute its plan.  AP Photo Close

By JOSH BOAK | 7/26/11 10:26 PM EDT

What starts out as a financial problem can quickly become a huge political one, the Greek finance minister readily acknowledges

Visiting Washington this week, he was talking about his own debt-torn country, even if his observation also might apply to the combative debate still raging here over raising the U.S. debt ceiling.

Evangelos Venizelos – his first name literally means “messenger who brings good news” – was here to shore up support from the International Monetary Fund and the Treasury Department for Greece’s second rescue package over the last two years.

Before a suit-clad audience on a muggy evening at the Peterson Institute for International Economics, he said, “We can breathe easier now, but the problem is to implement the program.”

European leaders announced last week they would provide the already dangerously indebted country with aid worth $157 billion. As part of the deal, private investors would have to swap their current Greek holdings at a 21 percent loss for $72 billion in new debt, a move that triggered a ratings downgrade by the credit agency Moody’s.

With Europe bound by the common Euro currency, the bailout is meant to stop the Greek crisis from infecting the rest of the continent. If Ireland or Spain, or even Italy, succumbed to their own debt troubles, the turmoil could roll across the Atlantic.

The latest rescue package is a test of the Greek political system with a suspect track record. Since 1826, Greece has roughly endured a combined 50 years in some form of default, according to research by the economists Ken Rogoff and Carmen Reinhart.

Saving Greece entails cutting into a bloated government. The country controls state-owned enterprises worth $63 billion and real estate valued at more than $280 billion.

Much of the bailout depends on a privatization plan to sell $72 billion of government holdings by 2015, the finance minister acknowledged. Besides generating revenue, the sales would in theory promote the kind of private sector efficiencies that fuel economic growth.

The telephone company, a rail service, the gas company, seaports, airports, highways and a weapons contractor are likely to be on the auction block. An Australian reporter asked if a recently ordered pair of submarines were available as well – an inquiry the finance minister brushed off.

He had come to the U.S. this time, he explained, in part to find investors, particularly Greek-Americans.

“This field of real estate is very important for foreign investors,” he said.

Executing the plan, the finance minister noted, will require political unity in the country’s parliament. His own party has been in power since 2009, so it will face elections in the middle of fixing the nation’s finances.

“During a period of historical and existential crisis,” he explained, “it’s necessary for the government and the opposition to organize a common national platform.”

And that’s something that analysts certainly might see as easier said than done.

Political unity? Good luck, Greece - Josh Boak - POLITICO.com