Greek Prime Minister George Papandreou told The Times today that he is dropping his plan to hold a referendum on membership in the euro currency zone and on the latest European bailout plan for Greece.More details will come out about the prime minister's about-face in the coming hours, but it appears safe to assume that his ruling coalition was doomed if the referendum took place. The country was staring at an economic abyss if the vote was "no" and therefore eliminated any bailout.
His announcement followed an emergency Cabinet meeting that he convened after a number of his own ministers came out against the plebiscite.
Such a vote would have required Greece to then drop the Euro and would have compelled other European nations to forgo any efforts to rescue the country from its economic miseries.
ORIGINAL POST: The developments in Athens are happening quickly, and they put into question whether the recently announced referendum by Prime Minister George Papandreou will take place. That referendum will ask the Greek people if they support the recently brokered bailout deal for Greece.
The Guardian is reporting that Mr. Papandreou is willing to make critical political concessions in order to provide domestic and international stability for his country.
2:22 p.m. [European time]Breaking news from Athens -- leaks from the cabinet meeting show that Papandreou has acknowledged that he can't hold the referendum, as exiting the eurozone would endanger Greece's future. Friday night's vote of confidence is still going ahead,....The still unresolved issue is whether the prime minister will resign.
It's not hard to understand why the Greek government is looking for a reasonable alternative to the referendum. Reuters notes that the government faced another potential collapse earlier today with repeated calls for Mr. Papandreou to step down.
Finance Minister Evangelos Venizelos broke ranks with Mr. Papandreou, coming out against holding the referendum after a bruising meeting with the German and French leaders.
French President Nicolas Sarkozy and German Chancellor Angela Merkel told Papandreou at a torrid meeting in Cannes on Wednesday night that Athens would not receive a cent more in aid until it votes to meet its commitments to the euro zone. Greece was due a vital 8 billion euros instalment this month.The BBC adds that even if Mr. Papandreou were to step down, the political instability in Greece would not come to an end.
Meanwhile, the Financial Times offers an intriguing editorial to explain why the prime minister took what so many people in other governments are considering the radical step of calling the referendum.
Faced with yet another difficult vote over the new debt deal and with mounting popular protests against austerity measures, Mr Papandreou was left with three options. The first was slow death: persist on his current path of political paralysis, dwindling popularity, and collapsing governing capacity. The second was immediate death: call for early elections that, all surveys indicate, would have resulted in an unprecedented rout for his party. The third was gambling for resurrection: call for a referendum that would give his government a new lease on life and salvage his political career. Seen from this perspective, his decision does make political sense.