It seemed things had been put in order after last Wednesday’s EU summit in Brussels. EU leaders had collectively decided upon a comprehensive rescue package that would help Greece write-down its huge debt, recapitalize troubled European banks, and leverage up the European Financial Stability Facility (EFSF). Even markets seemed convinced that this could work. However, Greek PM, George Papandreou, comes to shake the waters once again. His decision to lead the country to a referendum with respect to the newly agreed rescue deal, fills with extra uncertainty Europe’s future.
Shocking the rest of the Europe’s leaders, Papandreou announced yesterday a referendum that will take place in two months time, which translates into two months of utter uncertainty and further market volatility. This is two months of no progress on solving the European debt crisis, just so that Mr. Papandreou and his party can gain a confidence vote.
If Greek people vote ‘NO’, then Greece will be exiting the Eurozone. If its people boycott the referendum and the turnout is less than 40-50%, Papandreou would have to step down leading to national elections, prolonging the period of uncertainty and poor governance. A ‘YES’, will give him the popular vote to move ahead with the anti-popular reforms and policies, but will definitely not tranquillise the nation as the economy will be in a deep and protracted recession.
This is a rather selfish and naive decision on Papandreou’s part as he attempts to buy some time to calm the nation down and gain some ‘political capital’ to materialise his announced measures. Nevertheless, what is the point of leading your people to a referendum where the question is effectively “Eurozone or Bankruptcy?”. This referendum is an abuse of democracy’s top instrument and is a major threat to Europe’s efforts to try to find a solution to the European sovereign debt crisis. In times when EU leaders have to think big and consciously, Greece’s PM falls short. It’s not too late to reconsider..