Papandreou Referendum

Perhaps the idea of confronting a Greek referendum on the bailout can concentrate the minds of the EU elites.

Amiel Ungar , | updated: 11:44 PM

George Papandreou
George Papandreou


Greek Prime Minister George Papandreou used the word referendum last week and again this week. Referendum is not a word that goes down easily in the corridors of power in Brussels. The European Union, despite constant hand wringing about a "democratic deficit", would like responsible bureaucrats and the European political class to paternalistically quash an untrustworthy vox populi.

The European Union knows that referenda can prove unpredictable. Pro EU proposals lost referenda in Denmark, Ireland, the Netherlands and France. Referenda also allow the nationalist and sovereignist right to make common cause with a  left that regards the European Union as too pro-business and too economically orthodox for its insistence on balanced budgets rather than welfare outlays.

In previous cases where the European Union has been defeated in a referendum, it has either circumvented it, as in the vote on the Lisbon Treaty, or coaxed the problem country into holding another referendum with appropriate sweeteners in order to obtain the desired result.

The problem with applying such a strategy to Greece is that the financial markets will not display the same patience when it comes to debt repayments. When a payment falls due it has to be paid or else be called a "credit event", a euphemism for default. You cannot take half a year or a year to whip the dissenting state into line.

Yet it is hard to see what other choice the Greek Prime Minister has. His popularity rating is hovering around 30%; he faces growing dissent within his own Greek Socialist PASOK party and Greece is ablaze with strikes as workers who see themselves victimized by privatization vent their anger.

The economy has contracted more than expected. Further austerity is a hard sell to the Greek population because it appears to be all pain no gain. This is particularly true for the young who are living with 42% unemployment.

French finance minister Christine Lagarde, a leading candidate for the job of IMF managing, urged Greek politicians to emulate Portuguese lawmakers and pitch in to overcome the Greek economic crisis.

"One great strength of Portugal, which I hope Greece will be able to emulate, is (that of) the Portuguese political parties and authorities to join forces and form an alliance."

The Greek politicians show no desire to emulate the Portuguese and therefore somebody must give in real soon – the European governments, the banks,  the bondholders or all of them.