Greek Prime Minister George Papandreou’s call for a referendum on the bailout deal (a package to rescue the Greek economy the EU proposed on October 26 - 27 that includes drastic austerity measures) has disrupted the G20 summit in Cannes.
Instead of holding a calm discussion of current economic problems, French President Nicolas Sarkozy, German Chancellor Angela Merkel and IMF representatives will give Papandreou, who was urgently summoned to Cannes for this purpose, a hard time. The conversation is scheduled for Wednesday evening. The choice of its participants is well grounded – France, Germany and the IMF are Greece’s largest creditors, and the country's debt has already reached the astronomical figure of 360 billion Euros.
Papandreou’s idea to hold the referendum is an unpleasant surprise both for the markets, which registered a sharp drop (a decrease of six percent in the Eurozone countries on Wednesday) and European politicians who were extremely irritated at the news. Sarkozy said right away that the recent plan of the EU was the “only possible option for Greece.”
Finnish Foreign Minister Alexander Stubb said that a "no" from the referendum would be tantamount to Greece’s withdrawal from the Eurozone. A number of German politicians expressed the same idea.
In summary, Greece was made to believe that the EU proposals cannot be rejected.
The alternative could be costly, not only for Greece and not even to the EU alone. After learning about the potential referendum, the German banks that loaned money to Greece have already announced that they will not write off its debts until everything has cleared up. Developments such as these may lead to Greece’s early default, which would bring about, according to Oxford Analytica, a 20% drop in its internal demand and a 5%-10% decrease in its GDP which could be explosive in a country with 17% unemployment. The dominoes are lined up to follow – Italy and Portugal, which have already tightened their belts, may announce default after Greece.
Weighing values against interests
This is not just an issue of money. Economic necessity has run up against the EU’s much-vaunted values: freedom of choice and a quasi-religious reverence for election results. The German newspaper Süddeutsche Zeitung wrote: “The democratic nature of policy in the EU countries has come to contradict the undemocratic, unfair nature of the modern economy, which is beyond public control.”
“What’s wrong with seizing upon an opportunity to legitimize unpopular measures on economic recovery?” the newspaper asked, and then answered: “The problem is that the Greek economy has long ceased to be the business of Greece alone. Nor are Greek politics any longer just the business of Greece.”
The failure of the EU plan that would write off Greece’s more than 100 billion Euro debt would weaken the Euro, causing unpredictable consequences for the ruble and other currencies in the region. Meanwhile, writing off debts is connected with cuts in Greece’s budget expenditures – pensions, other social payments and a certain category of salaries. The Greeks are indignant because the banks did not ask their consent as they were stockpiling debts. Now European politicians – both in Greece and beyond – are no longer willing to consult the people about anything, but they will make them pay the debts to which they did not agree in the first place.
Given the choice between democratic ideals and filthy lucre, modern-day Europe typically chooses the latter. Sarkozy expressed this position when he said, “Giving the people a say is always justified, but the solidarity of all countries of the Eurozone cannot function unless each one consents to the necessary efforts.”
Quite recently, in 2005, France was criticized for blocking the introduction of the EU Constitution. The French did not support the proposed draft at their domestic referendum. But at the time, the issue had to do with principles and regulations, and the Eurocrats in Brussels agreed to wait.
Now the issue is one of real money. The current financial system is so fragile that even bad expectations can cause it to decline. The Greek referendum will still have to be officially announced, and it can be held no sooner than January. Panic and uncertainty will not wait that long.
Who will provide investments or loans to Greece and other Eurozone countries if it is unclear what currency Greece will have in half a year?
Diplomatic disease
The referendum idea was backed in Greece by Papandreou’s social-democratic government but criticized by many opposition deputies, above all from the center- right New Democracy party.
Papandreou currently maintains a critically small majority in parliament – 152 votes out of 300. Acting on his threat and holding a vote of confidence in the government will likely be followed by his resignation and new elections.
It seems that the October 28 riots in Athens that followed the EU decision forced Papandreou to confront the full severity of the situation. An iconic date is approaching: November 17 – on that date in 1973 there was a flare-up of student unrest. This represented the beginning of the end of the “Black Colonels” – the military junta was toppled the following year. Students usually take to the streets on that day, and Papandreou is very reluctant to bear all of the responsibility for the package of “economic recovery measures.” This is why he suggested this referendum.
Alas, Papandreou is not alone in his desire to shirk responsibility. His Finance Minister Evangelos Venizelos was rushed to the hospital on Tuesday, suffering from stomach pains. Many analysts called his illness “diplomatic,” because it allowed him not to answer the phone. However, Venizelos had miraculously recovered by the start of the summit in Cannes, and is now expected to arrive there with his boss, Papandreou.
In short, both the EU and Greece have arrived at a moment of truth. The summit will reveal to what extent the people of a sovereign country are allowed to be the masters of their fate in modern Europe.
The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
