By Nikos Tsafos

In early June, Greece faced a simple fact: the premise of its first bailout package, worth €110 billion, was no longer tenable. According to that deal, Greece would sell bonds in early 2012 to finance its budget deficit and roll over debt. But market sentiment made that impossible. What is more, Greek banks needed support, and the country's 2011 budget already needed extra funds to balance.

With no ability to tap markets for funds, the Greek government had two choices: default or get more official aid. Obviously the government opted for the latter, but securing aid was not easy. There was a sense in Europe that the original program was off track, that the government was too timid in passing reforms, and that revisions to the country's debt projections meant a greater effort was needed to restore solvency.

To respond to these problems, Greece proposed a medium strategy - a set of measures to drop its budget deficit from 10.5% of GDP in 2010 to 1% of GDP in 2015. At its core, this is a spending plan: the goal is to keep revenues at a relative flat share of GDP after 2011 (~43%) while cutting spending from 50% to 44% of GDP. Greece's fiscal problem is that by 2015, one in four euros spent by the government will go to pay interest on debt. Other expenditures need to fall to offset this growing debt burden.

The other aspect of the plan is an ambitious privatization program to raise €50 billion by 2015. To its critics, this is a sell-out. But the point of departure is that the Greek state holds assets of €500 to €600 billion. Given liabilities of €340 billion (end 2010), a sale could help with solvency. Admittedly, the task is enormous, having to sell so much in so little time and amidst a tough climate. But Greece's target is in line with the upper end of what other countries have done with their privatizations, albeit in better times. Greece faces a big but not an impossible task.

So where goes Greece stand now? The pledge of further European support - if it passes - would insulate Greece from the need to borrow until at least 2014, perhaps longer. Yet at that time, Greece's debt over GDP ratio would be 160%, which is hardly reassuring. Even so, Greece's chances would hinge on some positive growth momentum plus a reduction in the risk-aversion of markets. When everyone thinks the Eurozone is about to collapse, it's hard for Greece to catch a break. Better overall conditions would make life much easier.

Whether the plan works depends on political will and the public’s readiness to accept changes. Is there political will? Yes and no. On one hand, the prime minister is sincere about what is needed to restore sustainability and avoid default. But his agenda has been hampered by his ministers, many of whom oppose. A cabinet reshuffle just before this crucial parliamentary vote was meant to buy internal cohesion – so far, it has. But in the end, the prime minister needs to dismantle the system of clientelism and patronage that his father created and upon which his party’s legitimacy is founded. That he can do so is far from clear.

What about the public? Opposition to the reform agenda comes from three corners: those who stand to lose their privileges, those who outright repudiate the political class, and those who think reform is not coming soon enough. So far, the government has alienated all three corners, and the images one sees in Athens capture only part of the public’s frustration.

There are some signs that the public will support big change – if the government knew how to galvanize its energy. The government is sticking to a “we must not default” scare tactic. It is thus missing an opportunity to recast the country’s political ambitions and to create a narrative for the Greek people to buy into. This plan depends on the ability to paint a broader picture and argue convincingly that the reform agenda is not about paying back bankers in Paris and Frankfurt but about making Greece a better place to live. And so far that case has not been made.