by Mariyana Spyropoulos*

After yet more cliff-hanging tensions, on November 29 Euro-area finance ministers approved further support (5.8 billion euro or $7.7 billion) for Greece, which was days away from running out of cash to cover government salaries and other obligations. Still to come – but virtually certain in light of the nod from Brussels – is the next slice (roughly $3 billion) of the parallel loan from the IMF. Together, these funds will provide much needed breathing space for the recently formed coalition government.

The latest installment of this Greek drama was made possible only by a late about-face by the leader of the New Democracy Party, Antonis Samaras. Bowing to intense pressure from inside and outside the country, Samaras finally signed a letter to Greece’s creditors, in which he pledged his support for the terms of the bailout program as the other coalition partners had already done. However, members of Samaras’s party continue to denounce details of the austerity program as part of the political maneuvering ahead of the elections currently set for Feb 2012. At the same time, bickering within the Socialist PASOK which faces a leadership contest, threatens to undermine the implementation of important reform measures.

Meanwhile, the government under Papademos is looking to reduce the crushing debt burden on Greece and that means completing negotiations with the country’s private creditors. Back in October a deal was struck in principle that the banks and other private investors would take "a haircut", i.e. economic slang for a write down in the value of their holdings of Greek bonds. At the time, an overall reduction of 50 percent was agreed with the International Finance Institute (IFI) the private creditors association representing the majority of foreign holders of Greek debt. But talks on the details of the deal broke down almost as soon as they started in earnest with the bankers demanding an interest rate of at least 8% on new bonds and the Greek govt offering 4.5 to 5 percent. There is also disagreement over the use of an additional euro 30 billion of funds being provided by Greece’s Eurozone partners. However, seasoned observers of such negotiations believe a final deal will b struck before long – because the consequences of failure are too high for either side.

But even if the final terms of the deal are closer to Athens’s position, does this mean Greece is out of the woods? Far from it.

The country faces an almost unprecedented fifth year of negative growth, soaring unemployment, and further austerity as the Government seeks to get the deficit under control. Greece also faces the difficult task of raising revenues in a climate of diminishing incomes and passing further structural measures ranging from privatization of public monopolies and other state holdings to labor market reforms to modernization of the country’s notoriously ponderous administrative and legal procedures.

And all this against a backdrop of continuing crisis in the wider Eurozone are with the very existence of the euro under threat.

Can Greece make it - i.e. get back to something resembling a normal, functioning economy with a decent level of employment and incomes?

I believe it can, but it will be touch and go because the risks of failure are high on all fronts. First, internally, the government has no option but to implement the full set of measures agreed with the troika (ECB, IMF and European Commission) . These measure are not only needed to get Greece’s fiscal house in order and restore Greece’s competitiveness but a turnaround on the reform front would risk an end to the international loans that are keeping the country afloat.

Despite his written word, Samaras and his colleagues still hint at “renegotiating” the terms of those loans if his party wins the upcoming elections, but they will find that easier said than done. He might want to check with Enda Kenny, the Prime Minister of Ireland, who rode to power on a similar pledge in the middle of that country’s rescue deal with the troika and then found them adamantly opposed to his key demand, a lowering of the interest rate on the loan to Ireland. Faced with the dead fast refusal of the creditors to countenance such a concession, Mr. Kenny had no option but to turn around and quietly bury the pre- election pledge. Ironically, strict adherence to the program measures agreed with the troika has resulted in Ireland recovering faster than either Portugal or Greece, with strengthened competitiveness, faster growth, and an improved fiscal outlook.

There is very little reason to believe that the European powers-that- be would be more sympathetic to a new Greek government - especially one that had already promised to implement the program. All that such political double dealing is likely to achieve is to increase the uncertainly surrounding Greece’s commitment to reform when such commitment is critical to success.

Externally, the risks are, if anything, even higher. While Greece remains the weakest link in the chain of euro economies, the markets now have much bigger fish to fry. In recent weeks, interest rates on Spanish and Italian bonds have reached the levels that drove Greece, Ireland and Portugal into requesting an international rescue. France’s AAA rating has come under pressure, and even Germany has seen international investors turn up their collective nose at the most recent offering of government paper.

The fate of the euro itself hangs in the balance as last week’s coordinated action by the Fed and its counterparts has underscored. Whether that action by the central bankers will be enough depends largely on the steps their finance ministry colleagues take to enlarge the European bailout fund and bolster the IMF’s firepower, while at the same time putting in place a credible fiscal framework and closer financial integration. Only a cohesive and comprehensive effort by the Eurozone as a whole, together with a sizeable and effective firewall designed to resist further pressures on the larger vulnerable economies will convince markets that the politicians are serious about getting to grips with reform on a euro-wide scale. It remains to be seen whether the latest set of proposals backed by France and Germany aimed at strengthening fiscal coordination in Europe represent the first steps in that direction.

Greece must be part of that effort and that means the government of Greece must continue to focus on competitiveness and growth and the policies to achieve those goals. The past two years have been extremely difficult for the Greek people. To date, they have responded heroically. Despite the headline focus on strikes and demonstrations, the reality is that most Greeks know that there is a long road ahead to put the country back on its feet and have accepted the need for hard times. What they expect, however, is that the tough reform measures will be implemented in an equitable way and with protection for the most vulnerable members of society. This is a message the political leadership in Greece – across party lines – should heed.

The cradle of democracy, the birthplace of the Olympics, the foundation stone of Western philosophy – the gifts of the Greeks to the world have been many over the centuries. I believe that Greece can still set an example of how to face, and overcome, adversity, as it has throughout its long history. So long as political developments do not throw progress off track, and so long as the broader Eurozone problems are tackled decisively and credibly, Greece now has the possibility of re-launching its reform efforts with continued support from the international community. Success is not guaranteed. It will require continued determined efforts by Greeks at all levels of society for years to come. If those efforts were to be hindered by short-term political maneuvers, that indeed would be a Greek tragedy.

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*Mariyana Spyropoulos, an attorney, is a county-wide elected Board member of the Metropolitan Water Reclamtion District of Greater Chicago.