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Thursday, November 3, 2011

Papandreou's Referendum Call Only A Bluff ?

Referendum, shmeferundum...
With the fate of his nation--and with it, short-term, that of the greater European economy-- at stake, did Greek PM George Papandreou issue his stunning call for a referendum on the EU bailout in order to shift the political onus of supporting--or nixing-- the bailout onto the Hellenes themselves ? Or did he gamble that by holding the threat of the plebiscite over the heads of the Euro leaders, he could extract better terms ? 

Clearly, if his motive was the latter, he was sadly mistaken, for at Cannes, Merkel and Sarkozy stood firm, as Dina Kyriakidou and Abhijit Neogy reported in REUTERS on developments in the Greek/Euro crisis (excerpted below)

Greece's teetering government backed away from a proposed referendum on staying in the euro on Thursday, while European leaders talked for the first time of a possible Greek exit to preserve the single currency.

Papandreou told lawmakers from his Socialist party he had agreed to talks with the center-right opposition on a transitional government to implement a new EU/IMF bailout program. If that led to a consensus in support of the plan, there would be no need for a referendum.

At a bruising meeting in Cannes on Wednesday night, French President Nicolas Sarkozy and German Chancellor Angela Merkel warned Papandreou that Athens would not receive a cent more in aid until it met its commitments to the euro zone.

Greece was due to get a vital 8 billion euro installment this month and says it will run out of money in mid-December if it does not get the loan.

Greek Finance Minister Evangelos Venizelos broke ranks with Papandreou, saying Greece's euro membership was a historic achievement and "cannot depend on a referendum." He demanded that the government openly ditch the referendum idea.

Dissident lawmakers in the ruling PASOK party also spoke out against a plebiscite and called for a national unity government or early elections, casting doubt on whether Papandreou would survive the week in office. Some suggested former ECB vice-president Lucas Papademos should head such an administration.

Signaling a will to compromise, opposition leader Antonis Samaras called for a transitional government to lead Greece to early elections and said parliament should first ratify last week's 130 billion euro ($178 billion) bailout deal.

European Union leaders have long called for national unity in Greece in support of painful austerity measures needed to cut the country's crippling debt, expected to reach 160 percent of gross domestic product this year.

Sarkozy told a news conference the tough message delivered by France and Germany to Greece's political class was showing signs of bearing fruit. "Things are progressing," he said, welcoming Samaras' support for the bailout plan.

Euro area leaders talked openly of a possible Greek exit from the 17-nation currency area, seeking to maximize pressure on Athens and preserve the euro in case of a "no" vote.
So why did Papandreou engage in such brinksmanship ?

I'm convinced the PM's actual goal was to cajole others beyond his ruling socialist PASOK party into shouldering some of the political burden--and political cost--of backing the bailout, those "others" being other Greek political parties, through creation of a successor, unity government.  Given the fact that on the eve of his referendum announcement, his government's majority in Parliament had dwindled to three votes, and its fall imminent, the PM really had nothing to lose.        

If such was the case, the PM's bluff appears to have worked, at least for the time being.        

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