Acceptance of Austerity Measures “Critical” for Greece to Secure Funds

Tensions are mounting as Greece attempts to finalize a deal that would have the European Union providing emergency funding for the beleaguered Eurozone member. In exchange for the bailout expected to be in excess of 100 billion euros (US$146.3 billion), Greece would be required to agree to years of “austerity” measures to reduce overall government spending.

Gaining acceptance for these spending constraints however is proving problematic for Greek Prime Minister George Papandreou.

When the EU first came to Greece’s rescue just about a year ago government spending cuts were imposed on Papandreou’s administration. As expected, public backlash was both immediate and intense and confirmed that that the government would have great difficulty convincing the public to accept pension reductions and salary cuts for civil servants.

The fact that these actions were being initiated by a government running on an unabashedly socialist platform only added to the public’s indignation. Thus, the sight of hundreds of thousands of marching protestors was hardly surprising.

It is also not surprising that some members of Papandreou’s government are now threatening to withdraw their support from the Prime Minister’s agenda. After all, these are politicians and with the government’s popularity plunging, Papandreou faces a possible mutiny as individuals attempt to salvage their political careers.

Currency markets are taking a hard look at the euro in light of the situation. After touching a four-week high against the dollar, the euro dropped half a percent in mid-day trading in New York. Speculation is growing however that the European Central Bank will soon signal a willingness to lift interest rates next month and this will likely give the euro a boost over the dollar.

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