The mainstream political parties are losing their support in Greece, as one would expect, given the imposition of austerity. The communist party and neo-nazi parties are on the rise and threaten political chaos and civil unrest. Sound familiar? This was the Germany of 1922-23 as the German government faced a mountain of reparation payments from the aftermath of the Treaty of Versailles and an enforced austerity program. Now Germany is the enforcer and Greece may well become the new Germany.
This is the predictable outcome of the Merkel-Sarcozy-IMF bailout scheme. There is no way that this solution will hold. It will come apart and Greece will become a different country, unrecognizable from the rest of Europe. Portugal, Spain, and Italy will eventually be on that path as well, unless the Merkel-Sarcozy-IMF plans are abandoned.
Europe needs a reality test, not austerity. The sovereign debts in Europe are unsustainable and unpayable. This is a pretty harsh reality, but it is the reality. No amount of "political will" by Germany and France will ultimately matter.
Remember that the US situation is worse, once state and local debt is added to federal debt. Greece is our future as well unless the realization dawns that our debts are unsustainable and unpayable as well.
You can always tell when a country has lost it's fiscal sanity when it thinks that if only it could get more revenue out of it's richest citizens, it's fiscal problems would be solved. Taxing rich people is completely irrelevant to the fiscal situation of Greece and to the fiscal situation in the US.
What is driving the debt problems of the Western economies are the entitlement programs -- retirement and health care. There is no set of taxes that can support these systems -- not in the US and not in Europe. Absent private savings, there is simply no way to support our rapidly aging population and the health care needs of the future. The empty charade that "government programs can deal with this" is nonsense. The government is not providing any savings for the future and government policies have obliterated private savings.
So, watch the future play out in Greece. Coming to your neighborhood soon!