Greece: A State of Suspended Animation

November 6th, 2011
in econ_news

papandreou Econintersect:  Greek Prime Minister George Papandreou (pictured) narrowly survived a vote of confidence challenge on Friday (November 4) after backing down on his plan to put to submit a referendum to the Greek people.  Papandreou received 153 votes from the 300 member parliament.  The vote would have approved or rejected the austerity bailout plan worked out a week ago in Brussels (see GEI News) by the leaders of the EU countries.  Domestic and international opposition to the referendum was widespread.

Follow up:

The political crisis is far from over, however. Al Jezeera reports that Papandreou was able to garner enough votes only after saying he would be willing to step aside and form a cross-party caretaker government to rule until elections are held.  However, today November 5, Papandreou is working to set up a unity government, according to the Christian Science Monitor.  At least one of the major opposition parties is opposing that effort, calling for a caretaker government and new elections.

Opinion is split over what might have happened had the bailout/austerity plan been put to a popular vote.  According to the Washington Post:

Greek polls show a solid majority of support for staying on the euro, but the country’s European creditors say it can do so only if it implements austerity measures that are deeply unpopular. Papandreou’s unexpected announcement last week to hold the referendum was intended to show Greeks what was at stake, he said.

Some here thought the referendum might have been a good idea.

“It was a little risky,” said Anna Damianidi, 58, a retired freelance journalist who was sitting at a market in the working-class Athens neighborhood of Psiri on Saturday. “But maybe we could have worked very hard and explained to people why they needed the euro. That could have been good” for boosting the legitimacy of the bailout plans, she said.

Businessweek reports that the EU has put the Greek bailout ‘on ice’ until the political wrangling is finished.  The deadline for that is before year end when Greece needs the next bailout installment from the EU to cover obligations.  There is no more money after that point without the EU funds.

Note: Economist Michael Hudson argued in a GEI Opinion article on July 2 that there must be a national referendum in Greece. He wrote:

Only a referendum can commit the Greek government to repay new debts imposed under austerity. Only a referendum can prevent property that is privatized from being re-nationalized. Such a transfer is not legitimate under commonly accepted ideas of political and economic democracy. And in any event, a rent-tax can recapture for the Greek economy what the financial aggressors are trying to seize.

Hudson argued that the citizens of Europe were being forced to pay the bill for what was ultimately a bank regulatory problem.

Sources:  GEI News, Al Jezeera, Christian Science Monitor, Washington Post and Businessweek

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