After Prime Minister George Papandreou survived a confidence vote, Wednesday was a day of reprieve for financial markets from the recent obsession with Greece. But the debt crisis is far from resolved.
Even if Parliament passes the proposed austerity measures and a second EU-IMF bailout is approved, as expected, Greece still faces huge long-term challenges, featuring sluggish growth, a bloated public sector and rising unrest among its citizens.
"What you have here is a classic case of everyone making a bungle of things," says Steve Forbes, chairman of Forbes Media and former GOP Presidential candidate.
The Greek government has been "feckless," Forbes says, reporting no government representatives came to last week's Greek Power Summit,which featured some top industrialists of the 'Greek Diaspora' as well as officials from Poland and other nations who've gone through the kind of restructuring now facing Greece.
(As an aside, Forbes tells Henry and I in the accompanying video how the summit got caught in the crossfire between the protestors and riot police protecting the nearby Parliament.)
Meanwhile, "the EU has acted like a combination of indulgent uncle and Tony Soprano," Forbes quips. "They give you the money and then want to break your arm."
In addition to additional cuts in government spending, Forbes recommends the following Rx for what ails Greece:
- Debt restructuring: "There's not enough capital to pretend there's no problem," he says, suggesting banks and other creditors will be willing to negotiate and make "voluntary" rollover agreements and other steps to mitigate the fallout of default.
- Flat tax: Bulgaria, Romania and Albania are among the nations who've adopted Forbes' favorite policy, which he says makes it easier to enforce collection, a huge problem in Greece.
- Privatization: About $70 billion worth of state-owned enterprises have been identified as candidates for privatization.
Ever the optimist, Forbes believes the financial markets are prepared for and can absorb a Greek default, and that problems in Greece should not mean the end of the European Union.