It Won the Confidence Vote, but Greece's Government Still Has Everything to Lose (Time.com)

For Greek Prime Minister George Papandreou, winning the vote of confidence in Parliament was the easy part. His ruling Socialists hold a slim majority, and last week's cabinet reshuffle elevated party hardliners to keep rogue deputies in line. The vote, held just after midnight on Wednesday morning, passed 155 to 143.

Now, back to the hard part: Papandreou's embattled government resumes the deeply unpopular austerity program that's supposed to save Greece from defaulting on its massive national debt. Euro-zone leaders say the government must approve €28 billion of cuts, tax hikes, financial reforms and privatization in a June 28 vote before Greece receives the latest installment of bailout loans to allow it to keep paying off its debts. (See pictures of protests in Greece.)

Since last year, when Greece imposed a program of deep budget cuts and tax hikes in exchange for more than $150 billion in bailout loans from the European Union and International Monetary Fund (IMF), austerity has increasingly become a dirty word for many Greeks. "Austerity means unemployment, a dead economy and a 45% cut to my pension after I worked almost 40 years to get it," says Dimtrios Kountomerkos, a 58-year-old Athenian who retired from the Hellenic Air Force two years ago. "And still, after all these cuts, everyone says we're going to default again. What's the point?"

Kountomerkos and two of his friends were among the thousands who were waiting outside Parliament last night for the outcome of the vote. They drank beer and booed each time a deputy voted to support Papandreou's government. Most of the crowd was aligned with the aganaktizemenoi, the revolution-minded Greeks who have camped out for weeks in Syntagma Square across the street from Parliament. Modeled after Spain's young indignados, who protested their nation's own austerity cuts, the aganaktizemenoi represent the most visible revolt against Papandreou, whom they deride as a weak leader carrying out orders from international lenders instead of looking out for the Greek people. Many of these protesters are left-wing activists who oppose capitalism and blame banks for Greece's problems. They want to upend a political system they see as irrevocably broken, and call Papandreou's government a "junta" to associate it with the military dictatorship that ruled the country from 1967-74. It's a painful jab at Papandreou, who hails from Greece's most powerful family, which was chased out of the country by the military dictators. (See more on Greece's debt crisis.)

The aganaktizemenoi may be using a dated template to create a fresh revolution, but they have mobilized Greeks who have been quietly stewing about the country's downward economic spiral. Yet, the Syntagma protesters offer no clear solutions on how to save Greece from its debt crisis, says Stathis Kalyvas, a political-science professor at Yale. "It's a protest movement, so they know what they're against, but what they are for is very fuzzy," he says. "But it's an important movement in that it makes 'political time,' which is usually glacial, move faster - and it's clear Greek politicians have to move much, much faster on this crisis."

To do so, the Socialists must, at the very least, stay unified. That's easier now that Papandreou has brought in Evangelos Venizelos as the new finance minister and deputy prime minister. Venizelos, a 54-year-old constitutional-law scholar and former defense minister, is a forceful politician who is both widely respected and feared. He is also the Prime Minister's longtime foe, having unsuccessfully challenged Papandreou in 2007 for leadership of the PASOK party. "Venizelos is considered a tough, serious guy," says Ioannis Tsarmougelis, an economics professor at the University of the Aegean. "He is someone who commands attention in the party." (See why another Greek bailout is a bad idea.)

Passing the latest austerity measures also looks easier now. The new measures include more cuts to public spending, as well as tax hikes and a privatization plan. One part of this privatization includes reducing Greece's holding in the state-run electricity company, the Public Power Corporation (PPC). The PPC's union, Genop, says the privatization will lead to higher rates for consumers at a time when they're finding it hard to pay their bills. Genop is protesting with 48 hours of rolling power cuts that began Tuesday.

The most controversial part of the new austerity package is the government's plan to trim the public sector by 150,000 workers. Many Greeks consider the public sector bloated and inefficient, but cutting it will cost the government dearly politically. For decades, both PASOK and the main opposition New Democracy party crammed the public sector with their cadres, regardless of their qualifications, as a way to curry favor with supporters. "It's been a no-go zone for politicians for years, but the public sector must be overhauled," says political analyst Dimitris Skalkos. "It's the first step to wean Greek politicians from their dependence on special interests, and it will also open up this economy."

The public-sector union, ADEDY, will join the private-sector union in a 48-hour strike next Monday and Tuesday, when Parliament is supposed to discuss and vote on the new fiscal measures. Meanwhile, the Syntagma protesters are vowing to stay in the square until new elections are called. They say public opinion is on their side: According to a survey by Kapa Research for To Vima newspaper, more than 47% of Greeks surveyed oppose new austerity measures and want early elections. Papandreou is vowing to finish his government's term, which ends in 2013. (See how one year after the bailout, Greece is still hurting.)

Many analysts say Papandreou's government is doomed, and new elections are inevitable. But they also acknowledge that stability is crucial as markets and creditors watch Greece right now. The government is in talks with international lenders about a second bailout that could be as large as last year's package. The hard part, for Greece and for Europe, is far from over.

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As Austerity Anger Swells, Greece's Government Struggles (Time.com)

Updates Appended: June 16, 2011

Even after the scuffles between police and anarchists erupted into clouds of tear gas on June 15, Giorgos Liolios did not leave Syntagma Square. For more than a year, Liolis, a 37-year old Athenian struggling to keep his small bakery afloat, was part of the silent majority that gave Prime Minister George Papandreou the benefit of the doubt. But after a year of austerity left him nearly broke, his brother unemployed and the debt-ridden country no better off, he drove to Athens from his suburb to stand alongside thousands of angry Greeks who, for weeks, had transformed Syntagma into a mini-Tahrir Square, complete with drum circles, tents and Cretan rebel songs.

"Everyone in that building should be ashamed," he says, pointing to the parliament building, which is now surrounded by protesters waving banners depicting Papandreou as Judas and a donkey. "They want us to sacrifice, but we need to see why we're sacrificing. As Greeks, we just want to live with enough money to get by, to have a little dignity. We can't do that anymore. We can't take it anymore. Why can't George Papandreou understand that?" (See pictures of economy-driven riots in Greece.)

It's now clear that Papandreou got the message. On Thursday, which also happened to be the American-born Premier's 59th birthday, he presided over an emergency meeting of the parliamentary group of his ruling party, PASOK, which he leads and his father, Andreas, founded, after two deputies defected and a day after state-run NET TV reported that he had considered resigning. But afterwards, in a televised speech to PASOK deputies, Papandreou vowed to stay in office and work to lead Greece out of its debt crisis.

"We do not have the luxury to run away" from our responsibilities, he said, to applause from the PASOK deputies. "I have to fight, all of us here have to fight."

It was a show of party unity after a fractious Wednesday, when Papandreou huddled with advisors and talked to Antonis Samaras, leader of the main opposition party New Democracy, about forming a coalition government that would pursue austerity policy together. In a short televised speech Wednesday night, he said he would form a new cabinet and ask parliament for a vote of no-confidence. Samaras responded with his own televised speech and said that the country and markets no longer had faith in the Socialists.

Pressure on Papandreou has been building for weeks. On June 13 Standard & Poor's downgraded Greece's credit rating, handing it the lowest rating in the world and noting the country is "increasingly likely" to face debt restructuring. With his poll ratings in free fall and his own deputies defecting from the Party, Papandreou seems to be running out of options. Some analysts wondered if he would even last the day as Premier. (See more on Greece's debt crisis.)

"This government is almost dead," says Kostas Ifantis, a political science professor at the University of Athens. "I cannot see how they can push forward with the very, very painful measures the country needs. It was hard ten months ago, but it's even harder now."

There's little indication that a new government will pave the way to stability - even if new cabinet consists of fresh faces rather than longtime Greek politicians, whom most Greeks view as hopelessly corrupt and insular. "Markets are not going to respond well to this political turbulence," says Theodore Pelagidis, a professor of economic analysis at the University of Piraeus. "Right now, what is seriously lacking in this country is political leadership, and neither major party can offer it. There is no way out of this crisis without a healthy political system, which this country does not have." (See how one year after the bailout, Greece is still hurting.)

Papandreou's new resolve means snap elections will be put off - for now. If his government continues to struggle, elections may be the only option down the road, analysts say. "In addition to an economic crisis in Greece, we now have a legitimacy crisis," says law professor Aristides Hatzis, who runs www.greekcrisis.net, a blog that diligently charts every twist and turn of the debt crisis. "George Papandreou was elected on a mandate of expanding government and he has had to shrink it. People are demonstrating every day outside parliament, and some people are even attacking parliament. Elections are the only way to regain legitimacy."

But even if elections take place, the country still faces a leadership vacuum. Support for both PASOK and New Democracy have reached new lows, which suggests neither party would have a majority in early elections. Defectors from those groups have joined smaller parties, such as the sclerotic Communist Party of Greece (KKE) and the nationalist, often incendiary Popular Orthodox Rally (LAOS), diluting the power of the main parties even more. (See how Greek voters gave the austerity plan a second chance.)

Back in Syntagma Square, Giorgos Liolios shakes his head as young demonstrators throw rocks at riot police, who respond with still more tear gas. He smeared his face with liquid Maalox earlier in the morning to close his pores, but that doesn't stop his eyes from stinging. Through all the haze and turmoil, it's difficult for him to see any clear champion for the millions of Greeks struggling to get by. Business at his small bakery is down 50 percent from last year. His taxes have gone up. Even the spaghetti he buys at the supermarket has doubled in price. "I'm not an anarchist, I'm not a fascist, I'm not a punk," he says, wiping his face. "I'm a Greek. Just a regular person trying to have a regular life. I'm willing to make sacrifices for my country, but not if it leaves me for dead."

The original version of this story has been updated to reflect new developments.

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