Postcard from Greece

When Minister Schäuble visited Greece on Thursday (18.07.13) he said the country had made "impressive progress" in efforts to balance its budget. But he added that Athens had little choice but to press ahead with painful reforms. And prior to his visit, the Greek government did just that. Its narrow approval of more reforms paved the way for further layoffs and wage cuts - which sparked yet more protests.

Police sirens echoed eerily across Athens … church bells tolled in certain pockets of the country … and mounds of garbage lay strewn on streets and beaches, even at the gateway to the Acropolis. The sight and stench put off tourists who could be bringing much-needed money to this cash-strapped country.

For strikers, this was not just another Greek protest. It is supposed to represent the start of what civil servants are calling an "all-out war against the government" in response to its passing controversial legislation that puts some 25,000 state workers in danger of being laid off.

The cull is the first direct redundancy program in a country that has seen 125,000 people already retire from the public sector (but not a single one forced out of it) since the start of the crisis in Greece three years ago. As a comparison, more than 1.3 million private sector employees have lost their jobs to austerity during that same period.

The stakes are high in a country where the public sector has long been left untouched and handled like a sacred cow. The challenge for the government is immense.

Close to collapse?

Last month, the government nearly collapsed when it moved to shut down the country's state broadcaster, sacking some 2,700 workers. It managed to survive only after promising to rehire some 2,000 of the same people it had just fired. This move left some critics questioning Greece's true resolve to change.

International lenders aren't taking any chances. They say it is crunch time for the Greeks, and if that they fail to deliver on this latest reform, investors will pull the plug on financial aid that has been paying for the country's salaries and expenses.

Under the job cuts plan, some 4,500 teachers, municipal police and education ministry staff will be the first to face dismissal if they are not transferred to different departments within eight months. An additional 12,500 will be bumped into a so-called "mobility scheme" in September, with another 12,500 coming to this by the end of the year.

Unions blocking measures

Powerful labor union leaders have vowed to block public schools from opening in September if the government goes ahead with a single layoff. Rolling wildcat strikes are also in store, they say, bound to cripple what's left of the Greek economy.

But as I strolled through Athens this week, gauging the protest scene, I was struck more by the growing numbers of those keeping away from demonstration than those joining them. Just last year, hundreds of thousands would have turned up to any protest. Now, just 15,000 emerged - most of them die-hard unionists.

Resignation setting in?

Many bystanders I spoke to seemed resigned to the three years of austerity that has been gripping Greece. They don't like the policies, they say, nor do they see austerity as taking the country to safer ground. But three years into this devastating crisis, they have yet to hear of what they call "a credible and convincing alternative."

With unemployment running at 27 percent on average (and at 60 percent among Greek youth), many of the folks I met on the sidelines of the protests were whispering their support for the public sector reduction plan. In fact, one public opinion poll published last week showed 62 percent in favor of the layoffs - up from 40 percent a year ago.

'Tough love'

But deconstructing Greece won't be easy.

Lawmakers and mayors representing the two main parties in government and others who have dominated Greek politics for decades have long operated on a clientele-type system, stuffing the public sector with "politically pertinent" hiring, thus securing votes for re-election of politicians in power.

While most Greeks acknowledge the need for such practices to end, they also resent lenders pushing them too hard, too fast.

On a whirlwind six-hour visit to Athens, German Finance Minister Wolgang Schäuble this week refused to help Greeks write off more of their debt. Instead, he pledged 100 million euros ($130 million) in German credit, which is enough to help thousands of small and medium-size enterprises stay afloat until fall.

This temporary stopgap for Greek woes could represent some tough love ahead of Germany's September elections.