Will Greek Austerity Measures Work?

Today the Greek Parliament, flying in the face of violent and deadly protests, voted to adopt austerity measures designed to reduce Greece's mountainous debt and settle very shaky nerves in the euro zone.

Even if this plan is passed, though, will the euro - and the EU - be on the path to recovery?

It's hard to say, but I believe that the austerity plan - while not perfect - takes sufficient aim at Greece's bloated public sector.

Greece is notorious for being a state consumed by the public sector, which amounts for about 40% of its GDP. The average retirement age in Greece's public sector is 61, well below what it should probably be. The austerity plan should help with these matters.

What is not being addressed, however, is corruption. Corruption is widespread in the Greek public sector, causing hundreds of millions of euros to be paid out each year in under-the-table bribes for basic public services. In fact, corruption may be one of the key reasons why the Greek economy is so weak - systemic reasons aside.

Corruption has to be addresed by the Greek government in order for any austerity plan to be successful. Pay cuts, salary freezes, and layoffs may work to a degree, but corruption and grafts have to be squashed as a part of any package dealing with the public sector.

It's too early to say if these plans will work or not. Besides, even if they do, you still have a dire situation in Italy, Portugal, Spain, and Ireland that has to be handled. But, the markets will probably view this as a positive development, and in the short term, things could be worse.