Greece may cancel referendum, government teeters

posted at 2:05 pm on November 3, 2011 by Ed Morrissey

If George Papandreou wanted to impress his creditors with fiscal and political stability in Greece, he could hardly have done worse over the last few days. Papandreou made a deal with his EU partners for a second bailout of Greek debt that relies on austerity measures to control the nation’s deficit spending and debt. Instead of pushing that deal through the Greek parliament, Papandreou shocked Europe by suddenly calling for a referendum to approve the deal — a plebescite that would almost certainly fail, leaving the euro ready for a total collapse. Today, however, Papandreou backpedaled from the referendum, claiming that the opposition’s approval would make it unnecessary:

Visit msnbc.com for breaking news, world news, and news about the economy

Greek Prime Minister George Papandreou on Thursday softened his stance on a referendum on the country’s vital bailout package and offered to hold talks with the opposition to resolve the country’s political crisis.

In a speech to his cabinet on Thursday, Papandreou said he would assign the task of discussions with the opposition to two senior party members and praised their support of the bailout deal. If the opposition agreed to back the deal in parliament, no referendum would have to be held, he said.

“I will be glad even if we don’t go to a referendum, which was never a purpose in itself. I’m glad that all this discussion has at least brought a lot of people back to their senses,” he said in the text of his speech released to media.

Papandreou’s proposal earlier this week to put the hard-fought bailout package to a referendum horrified Greece’s international partners and creditors, triggering turmoil in financial markets as investors fretted over the prospect of a disorderly default and the country’s exit from the 17-nation eurozone.

ABC now says that the referendum has been scrapped — and some in Greece want to scrap the Papandreou government as well:

Ignoring increasing calls to step down, Greece’s prime minister announced Thursday he would seek emergency talks with the opposition conservatives after they agreed to back the latest European bailout for Greece.

Prime Minister George Papandreou, speaking at an emergency Cabinet meeting, warned that an early election was too dangerous because it would force Greece into leaving the 17-nation euro currency.

Papandreou sparked a continentwide crisis Monday when he announced he would put the latest European deal to cut Greece’s massive debts — an accord that took months of negotiations — to a referendum. The idea horrified other EU nations and Greece’s creditors, triggering turmoil in financial markets as investors fretted over the prospect of Greece being forced into a disorderly default.

Two officials close to Papandreou said Thursday the referendum idea has now been scrapped, after the debt deal won some support from the opposition.

It’s not just Greece that threatens the euro at the moment.  Berlusconi’s government in Italy might be on its way out as well, thanks to a failure to address its own high debts, and Portugal now wants better terms on the bailout the EU already secured for Lisbon.

Will Greece leave the euro?  There were some rumblings of that today (ABC mentions the possibility toward the end of the article), but Papandreou’s capitulation and almost-certain exit will keep Greece within the euro fold, says the Guardian’s Vassilis Monastiriotis.  While developments today are positive for the global economy, don’t look at Greece’s near-term future with much optimism, he warns:

Even though at the time of writing Papandreou seems to be trying to cling on into power, it is clear that we are moving towards the end of the Papandreou era. Given the political, economic and social deadlock that Greecehas experienced over the last two years, this must be a positive development. The problem is that much uncertainty about the future remains. It seems now that no referendum is going to take place. The Eurozone agreement is going to be ratified and Greece will remain, for the time being, inside the Eurozone. But the ratification of the agreement and the interim government will not calm either the economic or the political turmoil.

Greece will now enter a tense election period that will put more strain on public finances (with collapsing revenues and rising expenditures) and, more importantly, will not resolve the problems of political instability and legitimacy. It is very unlikely that the elections will bring into power a strong and stable government. More likely, they will bring new rounds of political bargaining for the formation of a coalition government and for an agreement on a policy programme consistent with the Eurozone bailout agreement.

The EU has hitched its wagon to a very unreliable partner.  That’s not just an indictment of Papandreou, but also of the nation he leads.

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not one dime…

DanMan on November 3, 2011 at 2:08 PM

All Greek governments have pretty much teetered constantly since 1946, for what it’s worth.

Hiya Ciska on November 3, 2011 at 2:09 PM

I will be glad even if we don’t go to a referendum, which was never a purpose in itself

In the original Greek, that sounds much better than “I meant to do that!”

Hiya Ciska on November 3, 2011 at 2:10 PM

Democracy: Who needs it?

A public service from your friends at the European Union.

That’s not to say that the Greek public voting this down in a referendum wouldn’t be immensely selfish – it should, however, be their right.

Red Cloud on November 3, 2011 at 2:12 PM

the EU is hitching its wagon to several unreliable partners.

where did I read today that Europe might go into a “mild recession”? when govts collapse because of debt, is that more than mild?

but. i am not an economist. what do I know?

kelley in virginia on November 3, 2011 at 2:13 PM

In other words, Merkel and Sarkozy told Papandreou that a referendum meant Greece was on its own. And they told that to the opposition as well.

rbj on November 3, 2011 at 2:14 PM

The EU is doomed.

It’s not just Greece; there is also Italy, Spain, Ireland, Portugal – they are just as boned financially/economically. There isnt’ enough money in the world to bail them all out.

Rebar on November 3, 2011 at 2:14 PM

The Eurozone crisis is a disaster staring us square in the face and the apparatchiks in Greece could achieve their intent and crash the world economy.

And if you don’t think anarchists and communists in the violent occupy protests in this country aren’t networked in to their like minds in Greece its time to slam some espresso.

Speakup on November 3, 2011 at 2:15 PM

Notice who’s missing from all this? That’s right, the US of A. The situation is inherently unstable; it can’t simply revert to what it was. This is an earthquake happening, and Germany, France, and Britain are going to be looking for a way to damp the seismic wave and restabilize it.

Outside initiative would be really useful here, but it’s not going to come from Obama. The obvious source of it would be Russia, which already has special ties with Greece (and has never minded mucking around in her neighbors’ governmental arrangements).

We’ll see how this goes. If there isn’t suddenly a resolution that arises from a US initiative, this is end of 20th century Atlanticism and of NATO as an effective organization.

J.E. Dyer on November 3, 2011 at 2:18 PM

The EU has hitched its wagon to a very unreliable partner. That’s not just an indictment of Papandreou, but also of the nation he leads.

Greece is a weak link in the EU and the Euro. But I think your treatment of Papandreou is unduly harsh and misplaced. What he essentially did was to create a political consensus where only recently none existed. Scary political theater yes but it was effective. Without the support of the New Democracy Party the austerity plan would have become a political football and unlikely to succeed politically but now they are on board and might even form a coalition for the purposes of further negotiations. I think this is a positive development.

lexhamfox on November 3, 2011 at 2:18 PM

A united Europe means the rich counties will always transfer wealth to the poor countries. You are seeing this in action.

Oil Can on November 3, 2011 at 2:22 PM

Until Greece faces the reality that their own desire for more and bigger government created their problem; they will never get out of it.

lorien1973 on November 3, 2011 at 2:22 PM

Europe is on the fast track in the wrong direction. I hope the EU crumbles and European nations regain their sovereignty and put an end to the Islamization and national suicide.

FloatingRock on November 3, 2011 at 2:28 PM

I think that someone made George Papandreou an offer he couldn’t refuse…

Khun Joe on November 3, 2011 at 2:30 PM

Until Greece faces the reality that their own desire for more and bigger government created their problem; they will never get out of it.

lorien1973 on November 3, 2011 at 2:22 PM

Yup…

“We can’t wait… Pass my Jobs Bill!” – Obowma

/

Seven Percent Solution on November 3, 2011 at 2:36 PM

So great, the EU forces Greece to stay in the EU so they can continue to flush money down the Greek drain which is really not going to greece but back to the German and Frence banks, all on the backs of the Germany and French taxpayers just to keep the illusion alive one more day that their banks and the Euro…are….totally…..screwed.

No one every said money laundering was easy.

Way to go Merkel/Sarkozy. You’ve learned from the Best – The USA

WisRich on November 3, 2011 at 2:37 PM

That referendum was a bluff from the beginning, not towards Merkel, Sarkozy, or any of their Eurocrats…but to scare the pants off of the markets…so that these G20 leaders will agree to put IMF money into the SPIV…The poker bluff is really for that purpose…

jimver on November 3, 2011 at 2:43 PM

So great, the EU forces Greece to stay in the EU…
WisRich on November 3, 2011 at 2:37 PM

yeah, looks like once you’re in, you can’t get out, way to go for a (non)democracy such as the EU…the initial Greek move to call a referendum was denounced by France’s nasty little tyrant, Sarko and Ms Merkel as “irrational and dangerous”…is that so? This is rather a testament to how fragile and poorly structured the Euro ‘experiment’ is that such a prosaic demand as asking for the consent of the governed could set off such acrimony in both Bonn and Paris…

jimver on November 3, 2011 at 2:53 PM

All Greek governments have pretty much teetered constantly since 1946, for what it’s worth.

Hiya Ciska on November 3, 2011 at 2:09 PM

That goes for at least one other member of the PIIGS, Italy.

There are Latin American strong-men with better job security than the Prime Minister of Italy, even if it is PM Bunga Bunga at the helm.

teke184 on November 3, 2011 at 3:07 PM

While developments today are positive for the global economy

Wrong, these developments are not positive for the global economy – they are simply kicking the can down the road where it’ll be much harder to deal with. What would be positive is to find a way for Greece to leave the Euro and create a good pattern for the eventual exit of the other spendthrifts. At least a referendum rejecting “austerity” would have brought the situation to the necessary crisis.

edshepp on November 3, 2011 at 3:30 PM

There are Latin American strong-men with better job security than the Prime Minister of Italy, even if it is PM Bunga Bunga at the helm.

teke184 on November 3, 2011 at 3:07 PM

don’t you be that worry about the Italian PM and his job security :-)…he only owns pretty much all Italian media :-), Italy’s second rich man, net assets of 6.5 billion USD… what do you think, he’ll make it through the day? :-)…I think so :-)…

jimver on November 3, 2011 at 3:31 PM

hat would be positive is to find a way for Greece to leave the Euro and create a good pattern for the eventual exit of the other spendthrifts. At least a referendum rejecting “austerity” would have brought the situation to the necessary crisis.

edshepp on November 3, 2011 at 3:30 PM

exactly, but it looks like it’s impossible now, or too late anyways …the Germans don’t want the Greeks to hold a referendum, so they won’t :-(…once you’re in, obviously you can’t get out…problem is that while the controversial Lisbon Treaty provides a voluntary exit clause from the EU there is no legal way out from the single currency. A country can leave the EU, meaning for Greece that it would lose billions in regional and farm subsidies, but there is no route to exit the euro and to remain in the Union. If there is a vote it would have to be all or nothing. so, what do you think, will the Greeks vote for the return to the drachma and the uncertainty that comes with it? I doubt that!…much easier to sell your soul to the devil, stay in the dictatorship that the EU have now become, and have your dignity and sovereignty obliterated in one swift move by those nasty little tyrants from Paris and Bonn…bit like slaves, really…

jimver on November 3, 2011 at 3:39 PM

This was the week when democracy died, where it was born, in Greece.

Schadenfreude on November 3, 2011 at 3:54 PM

This was the week when democracy died, where it was born, in Greece.

Schadenfreude on November 3, 2011 at 3:54 PM

great article…Janet Daley is spot on, as usually..

jimver on November 3, 2011 at 5:12 PM

So the heads of the Greek govt told the Greek people they could vote on a matter that clearly affected all of them, and now they’re telling those same people (who seem pretty prone to rioting) that now they can’t vote on that very same matter?

Wow. What could possibly go wrong?

runawayyyy on November 4, 2011 at 11:11 AM