Greece

The Greek parliament is required - by a consortium of EU and Eurozone institutions and the IMF - to vote today on a package of measures that would commit Greeks to a miserable lifestyle for at least a generation. If they vote YES there will be a very short-lived extension of the bailout. If they vote NO - or equivocate - the EU will be faced with an instant dilemma: will they maintain their hard line, or should they temporise? If they weaken their hard line in any way they will undermine confidence in the euro. Financial markets will expect the other relatively weak eurozone states to temporise on the tough measures that they have imposed and the position of the single currency will be made much worse.Borrowing costs to the Italian, Spanish and Portuguese governments will rise quickly to 'unaffordable' rates: France will face difficulties because the frontrunner for the forthcoming election has adopted policies that are contrary to the prevailing trend in the Union; and if France ceases to back the Germans' hard line then the future of the zone must be plunged into question.

How toughly Greece will be 'punished' if the parliament does not give an unequivocal YES is yet to be decided, but the requirements will become unsustainable. Greece will have to opt out of the euro and default on its debts almost immediately.

If the parliament does vote affirmatively by a sufficient margin the next tranche of funds will be released: probably into a special bank account from which money will be decanted only when Germany is satisfied that the conditions Greece has accepted are being met in full. A settlement with private-sector creditors of Greece can then be agreed: but it will only exchange new debt certificates for old, and those new debts will become unsustainable if/when Greece eventually leaves the euro and announces a new default.

If the parliament accepts the legislative and policy package it can endure only until the forthcoming election. Parties opposed to the infliction of pain will inevitably gain seats: so some politicians who vote for the package today will seek an electoral mandate to overturn it. Acceptance of the austerity demands of the eurozone will only be followed by a demonstration that the people will not accept it. Maverick police officers have promised to arrest EU and IMF officials if they come into the country: that may become a majority view. Policemen and soldiers will not shoot at their mothers and sisters if they are marching for bread and affordable rents. Mass protest will become unquenchable: perhaps even before the election. Greece has had a fake living standard based on debt for far too long. Hundreds of thousands of people have had well paid non-jobs and similar numbers have pensions derived from past tenure of such employment contracts. To force the nation to shift almost instantly from false prosperity to excessive real penury is too much to ask. It will not be tolerated.

Parliament may vote for what they know is impossible, to buy time and and stave off the inevitable day when Greece must leave the euro. The vote today will not be decisive.