Friday, November 04, 2011

There will be no referendum... (UPDATED)

1st UPDATE: 7:29 p.m. EDT: ...and there will be no new prime minister (at least not immediately).

Greece's prime minister George Papandreou has survived -- albeit barely -- a no-confidence vote.

The New York Times reviews the vote and its impact on the nation.

The result averts the risk of snap, or immediate, elections that would have plunged Greece into political chaos and moves the country closer to receiving the next installment of foreign aid that it needs to prevent default. But it does not fully resolve the continuing political drama — including the composition of the next government.
The move brings to an end a roller-coaster week that began with Mr. Papandreou’s surprise call for a referendum on Greece’s new debt deal with the European Union, a move that threw financial markets into disarray and threatened to spread contagion to Italy. He was then forced to back away in a humiliating about-face that saw his domestic support crumble rapidly, even within his own party.
A few hours before the vote, Mr. Papandreou offered a final appeal to the Greek lawmakers, declaring his willingness to open immediate talks on a coalition government and to step aside for the good of the country. 
In other words, take a good look at Mr. Papandreou while you can; he won't be prime minister for long.

ORIGINAL POST: ...but will there be a new prime minister?

George Papandreou made what can be called a bold, risky or idiotic decision this week when he said his country would hold a referendum to determine if it wanted to support the recent bailout deal for his country. Under relentless pressure, Mr. Papandreou changed his mind. Today, as the New York Times, reports, he could be tossed from office.
The decision to abandon his idea of holding a popular vote on the European debt deal did not end the political turmoil here; Mr. Papandreou still faces a rebellion in his own Socialist Party and the fury of some opposition figures, and he will have to weather a difficult confidence vote on Friday. But talk of a possible unity government eased international fears of immediate new elections and a looming default if he did not survive in office, cheering markets in Europe and abroad.
In an address to his party’s central committee on Thursday evening, Mr. Papandreou said there was no need for a referendum now that the opposition New Democracy Party had said for the first time that it would back the agreement, reached last week, to write down Greek debt in exchange for austerity measures and a commitment to the euro as the nation’s currency.
The prime minister invited the New Democracy Party to become “co-negotiators” on the deal and later said that talks on a unity government should begin immediately. He also suggested that he would be willing to step aside so that others could form a unity government if he won Friday’s confidence vote. “I am not clinging to my seat,” he said.
Needless to say, the Greek people -- who would have been most directly affected by any referendum -- are confused. Of course, they can't participate in any no-confidence vote. And, yes, you may read whatever you want into that previous sentence.

The Financial Times' op-ed page has an intriguing look at Greece, noting that the referendum perhaps was being looked at from an improper angle.
What is missing from the discussion is the role of adjustment. By adjustment, I mean correcting what is fundamentally wrong in a country’s international position. If a country is not paying its way internationally, it needs to sell more and/or buy less from its trading partners – or to attract more long-term physical investment from them For a country in the happy position of being outside a misconceived arrangement such as the eurozone, adjustment might be helped by devaluation. Exchange rate changes often need to be backed by domestic retrenchment. But to rely on that alone is a form of sadomasochism.
Yet that is what is being forced on the peripheral members of the eurozone, and a similar approach is promulgated elsewhere. The one form of adjustment that is made a condition of financial support is ever more severe fiscal austerity. Never mind that Greek national output is already more than 9 per cent below its 2008 level and industrial production nearly 23 per cent down. Never mind that unemployment has soared to 17 per cent. The Greeks are being told by international institutions and creditor countries to squeeze, squeeze and squeeze again. I know how I would have voted in a Greek referendum on the package, were it to have gone ahead.

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