Greece’s Referendum Step Leaves Europe Aghast
By Terence Roth
The European Commission was rendered speechless last night, unable to react to George Papandreou’s dramatic choice to have Greece’s people vote on the country’s future in the euro zone.
Referendums are anathema in Brussels, where scripted summits and handed-down directives are more the style than popular votes and their messy democratic outcomes.
The Greek Prime Minister’s sudden lurch toward more democracy also seems to have caught most of the rest of Europe unawares.
It was, in the tempered words of Rainer Bruederle, a senior German lawmaker, “a strange thing to do.” Why jeopardize the hard-won rescue plan secured only four days earlier at the European Union summit, a deal bearing no small financial risk to Greece’s euro partners?
Imperfect and incomplete as it is, the agreement had at least the glimmer of resolution. Instead, Europe and financial markets face another two months of uncertainty about whether Greece will trigger a financial implosion.
So there is the reason for surprise, even to his own Socialist party. Mostly everyone in Europe would have tried to talk him out of risking a catastrophe.
It’s down to raw politics in Athens.
Mr. Papandreou is put into a corner by a Greek population that is near mutiny over the heaps of austerity ordered by their government to comply with conditions for international aid.
After months of protests and strikes, it was becoming clear that plans for still more spending cuts and layoffs threatened to escalate popular opposition on the country’s streets.
His approval ratings in opinion polls have dropped under 20% within only two years of being elected and even some of his own party members are wavering.
Calls for new elections are rife, with the opposition parties pushing hard to topple Mr. Papandreou’s government.
His solution was to call the bluff by offering what effectively is a vote on whether or not to stay in the euro. Polls show that while more than half of Greek voters hate the reform programs after four years of recession and mass layoffs, three out of four want to remain in the euro zone.
Global financial markets can only hope that he guesses right and Greeks will reluctantly agree to years of more financial hardship rather than to take a step that would lead to isolation and national bankruptcy.
In that case, Mr. Papandreou remains in power with a mandate without new elections.
There is a third option. If enough Greeks boycott the referendum to make it farcical, then Mr. Papandreou would have no choice but to step down and bring on early elections.
This would only extend the political uncertainty deeper into next year, with the very big risk that a new government will want a new deal.
And then there is a fourth option: more members of his Pasok socialist party defect and erase his slim majority in parliament, collapsing his government and moving the president to call for new elections.
The first defectors have already declared themselves this afternoon, suggesting that the government could fall any time. And that would throw open the same questions of whether the whole Greek rescue plan can endure as it now stands.
