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GIFT HORSE FOR GREECE? November 3, 2011

Posted by wmmbb in European Politics, Social Environment.
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What to do when the polls are falling, the government has a small majority and there is open dissent in the ranks, even when the EU is offering money in the pipeline? The solution of the Greek PM was to hold a referendum.

What’s democracy got to do with it? This is finance and the protection of the international sovereignty of Banks, and their right to impose austerity, the radical reduction of living standards on masses of people. In this context direct democracy, even though it is the the Greek Government, is fundamentally shocking. Before the magic work can be said, Europe will be looking like South America, and there will have to be a reverse invasion from Africa Com to re-impose order.

Deutsche Wella reports that Europe demands an explanation from the Greek PM for holding a referendum on the bailout. Yet it seems to be the case, as Andrew Bowen notes that the bailout was designed for the financial institutions and not for the people of Greece. And that might be the real problem with the referendum:

Public support for the bailout deal, which obliges Greece to continue its course of harsh austerity measures, was difficult to gauge. A weekend opinion poll found that nearly 60 percent of Greeks viewed the EU summit last week as “negative” or “probably negative,” although more than 72 percent wanted to remain in the eurozone.

The agreement provides 100 billion euros ($137 billion) in new public financing for emergency loans, and asks banks to take a voluntary 50 percent reduction in the value of their Greek government bonds. It also upholds demands that Greece cut its massive budget deficit with painful spending cuts.

Nick Malkoutzis, deputy editor of the Kathimerini newspaper’s English edition, said the agreement among EU leaders was not the comprehensive plan many Greeks had hoped for.

“It left a very open question about how Greece gets out of this crisis,” he told Deutsche Welle. “One thing the agreement doesn’t tackle is where growth, where job creation is going to come from, how the country is going to move forward. And the government has also proved that it doesn’t really have an answer to that question either.”

The BBC suggests that the referendum may not be held:

The Pasok government faces a vote of confidence in parliament on Friday. It will be a knife-edge vote. If Pasok loses then it will either have to try and form a new coalition government of national unity or call early elections. The political instability triggered by a defeat for Mr Papandreou on Friday would only deepen the crisis for Greece and the threat of contagion to other eurozone countries.

There is speculation that Mr Papandreou may anyway be forced to resign soon – and that could scupper his referendum plan.Pasok now has a narrow majority in parliament – 152 out of 300 seats. Mr Papandreou is battling to hold the party together.
A leading Pasok MP, Milena Apostolaki, left the party in anger over the referendum plan. Six other Pasok MPs called on Mr Papandreou to quit.

The numbers are crucial, because a referendum cannot be held unless parliament first approves a referendum bill.It is not yet clear when a referendum could be held. It would most likely happen in December or January.

Mr Papandreou wants the vote to be as soon as possible – once the details of the new EU-IMF bailout plan are nailed down.But the lenders could pressurise him to scrap the plan, by withholding the next tranche of Greece’s current bailout. There are predictions that Greece could be bankrupt as early as mid-January if it does not get the rescue money.

And then there is the question, as perhaps is likely, of what would happen were a referendum vote against the bailout plan. BBC News suggests:

There are dire predictions about a No vote. Opinion polls suggest that most Greeks oppose the new EU-IMF bailout plan.

A No vote would make a disorderly default likely for Greece, as its current lenders would regard it as a lost cause. That would mean holders of Greek sovereign bonds taking a big loss – bigger than the 50% write-down that the EU has proposed.

Such a default would almost certainly push Greece out of the eurozone, triggering a chain reaction, as the other “peripheral” eurozone economies – Portugal, Spain, Ireland and Italy – would find it impossible to service their own debts.

France would probably lose its triple-A credit rating, as French banks hold a large pile of Greek debt. A meltdown in the eurozone bond market could ultimately doom the euro.

A No vote would be a crushing blow for Mr Papandreou – he would probably have to resign, and Greek politics would be in chaos.

Yet opinion polls also suggest that most Greeks want to stay in the eurozone. A cleverly phrased referendum question could warn them of disaster if Greece were to abandon the euro – and link that scenario to a rejection of the bailout plan.

Margaret Kimberley and Robert Reich takes the alternative view that democracy should trump finance, and believes the principle should apply equally in the US.

ELSEWHERE

Kim at Lavartus Prodeo reviews the alternative opinions as to the best course of action for Greece and Europe.

UPDATE: 4 November 2011

The LA Times reports that the Greek PM has called off the referendum following a cabinet meeting.

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