A number of important posts worth noting about the decision of Greek Prime Minister Georges Papandreou to submit the EU’s latest “rescue”/austerity package to a referendum:
…no one anticipated that a long suffering debtor would revolt, which is what Papandreou’s announcement of a referendum on the punitive bailout amounts to. He’s publicly coded it in securing Greek support for the deal, but this is actually a clever form of brinksmanship. As Marshall Auerback and Rob Parenteau foresaw, Greece is engaging in a Samson-like gesture of pulling down a much bigger structure to end its misery.
European politicians have preferred to integrate by stealth rather than public debate. But they cannot do that any more. They have tried repeatedly, and failed repeatedly, to treat the rolling crisis as another, albeit much more complicated, technocratic problem, which can be solved through the usual kind of technocratic solution.
Should there be a referendum (the constitutionality of which is, at this stage, far from certain) and should it reject the EU deal, then the country would default on its debts. After that, it’s anyone’s guess. There’s no way it could stay in the euro, but no way it can default.
And the default would trigger a credit default swap cascade, which could well finish off the global banking system. Greece’s move has prompted an emergency meeting between Nicolas Sarkozy and Angela Merkel on the matter, at the G20 meeting in Cannes tomorrow.
The crisis may take more than one government, with demands for a (on participating in the bailout) being heard in Germany, and the FDP?—?junior member of Merkel’s government?—?saying it would be happy to see Greece default and exit the euro.
Crisis indeed: from the Greek, the moment at which the patient lives or dies.