If you’re wondering why the Greek government may fall today, all you need to do is think about the current battle in the U.S. Congress, if Societe Generale’s analysis of the situation is correct.Essentially, the left-wing prime minister, George Papandreou, wants to raise taxes without restructuring Greece’s public sector. And his right-wing rivals want to restructure the country’s public sector. Sound familiar?
From Societe Generale’s James Nixon:
In many respects the situation in Greece very closely mirrors the political situation in Portugal. The right-wing business orientated opposition is unhappy that their spendthrift socialist government still haven’t bitten the bullet and undertaken root and branch reform of the public sector. Hence Mr Papandreou continues to rely too heavily on hypothetical increases in tax revenue rather than wield the axe over his own supporters. As in Portugal, the opposition may be prepared to bring down the government over this if they can and force new elections. This would leave the Eurogroup having to negotiate with the different political parties in Greece in order to secure agreement on further austerity.
While President Obama is willing to make budget cuts, they are no where near those Republicans want. And while Republicans refuse new tax hikes, Democrats want them to be a part of the deal.
So if you’re trying to understand Greek politics this week, it’s not at all that different from the U.S.
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