Greece’s Referendum Call – OpEd

Greek Prime Minister George Papandreou is going for broke in calling for a referendum on the rescue package agreed with the euro zone — and in this case the word “broke” could not be more appropriate. If the gamble does not work, his country will certainly go broke. The rest of the euro zone countries are not going to dig deeper into their pockets to help what will be seen as a greedy and ungrateful Greece.

It is difficult to comprehend why Papandreou has taken a gamble that he must have known would result in yet further resignations from his parliamentary party, calls by other party members on him to resign and the prospect of him loosing a confidence vote on Friday.

He did not need to. It is not the case that he had no alternative. The EU bailout was something of a success. The medicine may be bitter — massive cuts in public spending, public sector jobs slashed, pensions and wages cut — but Greece needed it anyway and on the plus side Europe had shown massive solidarity with Greece. It agreed an unprecedented $140-billion loan and a write-off of half its debt. That was a considerable achievement for his government.

True, if there were a “yes” vote in a referendum, it would rob those who are still taking part in massive street protests of any political legitimacy. But Papandreou had already got Parliament to back him, albeit reluctantly. With that, the protests were bound to run out of stem. Most Greeks, while they dislike the austerity measures, do not believe in taking the law into their own hands. A referendum is a different matter. They can legally say “No.” With the opinion polls indicating that a majority of them, regardless of political persuasion, are firmly opposed to the package, that is likely to be the way they will vote.

If so, then it is the end of the line both for Papandreou, who will be morally obliged to resign, and for Greece. It will have to quit the euro zone. There will be no renegotiation of the bailout. It had to be approved by all the other euro zone states. Some, who have been fiscally responsible but not the wealthiest of countries, were deeply unhappy with the deal as it was. They went ahead with it out of solidarity with Greece. They are not going to give it a second chance.

If Greece refuses to quit a club that it should not have been permitted to join in the first place, the euro zone countries will have to find a way of expelling it. There will be no alternative. It cannot be allowed to drag them down any further.

Possibly Papandreou has just had enough of the pressure. But whatever mental process brought him to this staggering announcement, his own political judgment is now in question. Last week saw other euro zone leaders working round the clock to deal with a Euro crisis that in fairness was not all Greece’s doing — but much of it was and it was Greece that was the main beneficiary. The referendum decision undoes all the hard work they did. Worse, by announcing it without even informing them beforehand, he adds insult to injury. This is an act of sheer betrayal. The rest of Europe is going to conclude that he, and by extension Greece, cannot be trusted.