Greece, the eurozone, the EU and the G20 were in crisis yesterday, as Greek Prime Minister George Papandreou lost the support of his deputy PM, five members of his cabinet, and several Pasok MPs, leaving the entire country, and the continent, in a state of disarray.
The crisis prompted a midday meeting of Papandreou’s cabinet, at which Papandreou was informed that he did not have support for a referendum. He then went to visit the president to request that he appoint a government of national unity, with some cabinet ministers drawn from the opposition New Democracy party.
Initial reports suggested that New Democracy leader Antonis Samaras would reject the offer — as it would require New Democracy to support the October 26 “rescue package”, which it has previously opposed. Later in the afternoon he announced that he had agreed to the rescue package on October 27, although this was news to everyone concerned.
By that point, the deal had changed. Samaras and New Democracy would be co-negotiators, Papandreou said, and on that basis he would go into Friday’s vote of confidence, fully intending to continue as prime minister without new elections.
By half-past eight (Athens time), Papandreou had his answer from New Democracy, with Samaras demanding Papandreou’s immediate resignation, and calling a parliamentary walk-out of his party. Papandreou continued to insist that negotiations with New Democracy begin immediately, but there were later rumours that he had agreed to a compromise with his cabinet — that they would whip Pasok together to win a vote of confidence, and that he, Papandreou, would the resign with dignity, with fresh elections in the offing.
That was the state of play at the end of the evening, but there had been much more throughout the day. It had begun at 5am, when Deputy Prime Minister Evangelos Venizelos, on arriving back from the Cannes meeting with G20 leaders, publicly stated he would not support a referendum on being in or out of the euro.
Papandreou had been humiliated at the G20 meeting in Cannes, with Nicolas Sarkozy and Angela Merkel dictating a change in the referendum question — from the specific question of the rescue package to the general question of euro membership — as well as its timing, and putting on hold the €8 billion tranche of emergency support to cover the country’s debt repayments ahead of a larger payment from the EFSF.
The French and German leaders rejected Papandreou’s January date. They wanted the vote moved forward from mid-January to early December to quell anxiety, and they made any payments conditional on acceptance of the full deal — which would see the country impose up to 30% public budget cuts across the board, and privatise vast amounts of state resources.
Hours after his dissent, Venizelos was in talks with six rebel cabinet ministers, ahead of today’s planned vote of confidence. Minutes before the emergency cabinet meeting, he said he would not support a referendum “under any circumstances”.
For a couple of hours in the late morning, attention was briefly diverted from Greece, as Italian bond prices, having dipped slightly, rose again to 6.35%, despite the belated delivery of an economic recovery plan by Italy. The plan would see mass sell-off of public holdings and utilities, but has failed to appease those demanding the resignation of Silvio Berlusconi. It did not quell fears in the markets, which left Italian bond offerings untouched.
On Thursday, six members of Berlusconi’s PDL party signed a letter urging him to resign, and inaugurate “the new phase of Italian government”, and President Giorgio Napolitano was talking to leaders of other parties, a move widely seen as a prelude to a “national salvation” government. Berlusconi’s continued presence as PM, and the resulting lack of confidence, is widely held to be the single factor keeping Italy’s bond prices high.
Attention switched back to Greece, as Venizelos’s factional meeting continued and the noon cabinet meeting was delayed for more than an hour. Rumours floated freely — that Papandreou had forewarned Sarkozy and Merkel of his referendum plan, and that much of it was theatre.
Another version had Papandreou telling the cabinet that the whole purpose of the referendum was to confront Samaras and make him take a share of responsibility, a suggestion that left Greek bloggers giddy with anger. At one stage it was suggested that Loukas Papadimos, the Greek vice-president of the European Central Bank, would be appointed caretaker prime minister while new elections were held.
Nor was the final result much clearer. Forty eight hours ago, Papandreou had set out a clear rationale for a referendum — a move that was howled down by those who argued that it was a way of letting Europe put the pressure on Greeks and hammering home to them what a disaster default and eurozone exit (which also means EU exit) would be. By the next day, the referendum was off the table, but what was wanted instead — immediate elections — wasn’t there either.
Indeed, the paradoxical conclusion was that a vote of confidence in Papandreou would trigger his departure, and the de facto confirmation of his government would prompt elections. This farcical chase was all done in pursuit of, inter alia, market certainty.
But will the rejection of the referendum achieve the desired aim of clarity? Even if Papandreou resigns, there is no requirement for the country to go to an election to ratify a new PM and government, though it seems unimaginable that they would not do so. But would an election campaign give the clarity required to express the will of the people? There are, after all, several positions one could take on the October 26 rescue package — and in one afternoon the New Democracy party held all of them.
Indeed the only party that wants to leave the eurozone is the KKE, the Communists — and they have explicitly announced that they will not be part of a governing coalition, turning up simply to vote supply for all the rope that capitalism requires. The most likely result would presumably be Pasok taking a haircut of its own, but New Democracy not gaining enough seats to form government in its own right. Would it serve in a grand national unity coalition with Pasok?
And whatever the result, why would the general public — and the Communist-led faction of the trade union movement — accept the deals that they have spent the past two years rejecting? Whatever the calculus behind the referendum, it would at least settle the question either way, and a government, any government could claim a clear mandate — and at this point it probably doesn’t matter if Izzy Dye and Dimitri Dollis run Greece, as long as they implemented the referendum.
As our commentator Nick Skrekas noted:
I think its about time we had a serious debate in this country as to where we want to go.
You can’t have it both ways — one week political, media and other leading institutions are screaming about the new bailout being an oppressive sellout that denigrates sovereignty — and then the very next week argue that the referendum will undermine the deal that you never wanted.
Financial support will always come with strings attached, it is up to an informed majority of Greeks to accept or reject it — as long as they have full information and a reasonable view of what the future will hold on casting a yes or no ballot.
I think the average Greek in the street has more maturity that they are given credit for.