Greek Referendum Plan: Consternation

• November 2nd, 2011
• Posted by 7thmin

Consternation has greeted the announcement by the Greek government (31.10.11) that it plans to have a referendum on accepting its international debt package, early in 2012.

“DONE DEAL” LOOKS ALL UNDONE

The immediate response was disbelief on the part of Greece’s European Union partners, which had  driven hard for the settlement at a series of EU summits and gatherings with stakeholders, such as banks, and international agencies, including the International monetary Fund (IMF).

From last week it was all set up, that Greece would get access to guarantees from an expanded European financial stabilisation fund; up to half its public debt would be written off, with banks to take a heavy drop from that; and governments would support them in a recapitalisation.

See EUAustralia Online, “Decision on debt at Brussels”, 27/10.11.

The crisis of indebtedness had been threatening to spread to other parts of the Eurozone, the 17-member bloc of EU countries using the joint currency, creating excessive stress on their agreed standards of fiscal and monetary management, and increasing the possibility of deep recession in the “real” economy.

TOUGH TIME FOR GREECE

The cost to Greece was a very sweeping austerity program, creating sudden unemployment, upsetting society in waves of panicked and bitter street demonstrations, month after month, generating expectations of a decade of recession.

The centre-left Pasok party government had seen resignations on deputies under pressure bring down its parliamentary majority to only three – now two after the latest departure this week.

The Prime Minister, George Papandreou (picture), defended the referendum idea, saying it would force a recognition of Greece’s commitment to a “European” solution; as opposed to, most likely,  wholesale defaulting on debt, abandonment of the European currency, somewhat unpredictable further consequences of such moves.

Volatility in Greek politics, not new, can be off-set by embedded loyalties that produce only small swings in voting, and so, an impasse; witness, in recent history, the slow and painful exit, and return, of the other Prime Minister Papandreou, Andrea, in a succession of close forced elections of the late 1980s.

Opinion polls in the country show strong rejection  of the EU plan,  but still, in  some cases, a  more equivocating outlook on voting intentions, raising the scenario of a vote, a hung parliament, a coalition – and still maybe no clear solutions.

EUROPEAN RESPONSE

The immediate question n is whether international partners, especially the public in other Eurozone states, or investors on financial and money markets, will tolerate such equivocation in Greece.

Immediately after the referendum was announced, prices began a tumble on the markets.

It was being asked, if the Greek government is not to begin receiving support under its contract with the EU, how will it get through to the referendum date, at the start of next year?

Would there be a Greek government?

Mr Papandreou is meeting with Ministers, many unhappy with his position, and he has a parliamentary censure vote scheduled for this Friday.

FRENCH PRESIDENT AGGRIEVED

First  adverse responses were registered in  France , with reports put out on a bitter response at the Elysee Palace.

Said a commentary in Le Monde:

“Nicolas Sarkozy is shocked by the announcement of a referendum, made to general surprise …  The French President thought that the problem with the weak state of the Greek economy, and the issue of the recapitalisation of banks, had been brought under regulation, as a result of the European Council on Wednesday last week. It seemed settled that the European financial stability funds would be reinforced, providing assurance that the debt crisis would not go on to contaminate the situation in Italy. Then, suddenly everything has to start again.

“’This move by the Greeks is irrational’”, said a source close to the President.

“Some €8-billion in agreed support from the IMF has not yet been delivered, and it seems unimaginable that it will be until the situation is clear. Is Greek going  to default on its debt? That is the catastrophic situation that was bothering one source after a visit to Mr Sarkozy on Monday evening …”

The French President called an urgent Ministerial meeting for Tuesday evening in Paris.

BAD OUTLOOK

The mood of consternation is told by the headlines on current news agency reports, e.g. from Reuters:-

Euro drops 3rd day as Greek referendum fans fear;  Germans warn of Greek euro exit after referendum gambit;  Exclusive: Greek finance minister unaware of referendum plan; Referendum “No” could leave Greece bankrupt:  Juncker;  Sarkozy, Merkel to meet Greeks on Wednesday;  Greece sneezes. Will Italy catch a cold?;  Democracy and Chaos are both Greek words; PM under fire over referendum call on bailout Papandreou to meet French, German, EU leaders in Cannes; EU partners surprised and angry; Polls indicate most Greeks oppose bailout deal;  Opposition parties protest, want snap election …

The next instalment in the management of the debt crisis in Europe was expected to be a summit of Group of 20 (G20) leaders at Cannes this Thursday (3.11.11).

The gathering will have a different complexion now; more urgent; with intense interest focused on the side meetings, where Mr Papandreou will be asked for explanation s – though plainly very late to alter the train of events he may have put on course.

Reference

Dina Kyriakidou and Lefteris Papadimas, Reuters, London, “Greek PM defies anger to defend referendum plan”, 2.11.11. http://www.reuters.com/article/2011/11/02/greece-referendum-idUSL5E7M13Z520111102, (2.11.11).

Le Monde, Paris,  “Sarkozy, consterné par l’annonce d’un référendum en Grèce”, 31.10.11. www.lemonde.fr, (2.11.11).

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