Papandreou's referendum

Greece has left Europe holding its breath. On Monday, Prime Minister George Papandreou took everyone by surprise with his call for a referendum in which Greek voters would decide for themselves for or against the new international bailout plan, which would include a write-off of 50 percent of Greek sovereign debt.

Before the week's end, Papandreou also plans to submit himself to a confidence vote in parliament.

With this initiative, he has coupled his political destiny with the bid to free Greece from its debt trap. But he has also sent a shudder through the highly sensitive financial markets and the other European capitals.

So should the laboriously negotiated aid package now be placed in the hands of a Greek populace which has already rebelled against necessary austerity measures?

National consensus unlikely

A Greek "no" would promptly lead to definitive bankruptcy, catapult Greece out of the eurozone, and plunge Europe into new financial turbulence.

Certainly, Papandreou is engaging in a risky gamble. But he does not have many alternatives. A national consensus with Greece's opposition, which would be the best prerequisite for enacting austerities, appears improbable. That is because the whole opposition has committed itself to a confrontation course with the government. The cuts in salaries and pensions - of an extent never before seen in the European Union - have turned broad segments of the Greek population against the government.

Even the Socialist party PASOK's narrow majority in parliament has shrunk further, leaving a margin of only two seats.

Fresh elections, according to the latest surveys, would probably leave Greece ungovernable, because neither PASOK nor the conservative opposition party New Democracy would muster a significant majority.

Now a referendum is on the cards. Papandreou needs fresh legitimation, and he is seeking it from the populace.

Greeks want to stay in the eurozone

The exact referendum questions to be posed are not yet fixed, but the choice will be something like this: Do you want a Greece that accepts the bailout package and remains a member of the eurozone, or do you want a Greece that leaves the "euro club," ends up insolvent, and returns to its former drachma currency?

And this is the point at which Papandreou, and with him the whole country, has a chance. The latest surveys show that, while a majority of Greeks reject the radical austerity measures, they do not reject the eurozone.

If this is the question the Greeks are presented, then a "yes" vote to remain within the euro family seems more likely than a "no" vote.

Papandreou's government would then have fresh legitimation to launch the most ambitious rescue action undertaken in any country in recent history. The protests, which in recent weeks have escalated into anarchy, would sooner or later die down, and at least assume a subdued form.

And the opposition would no longer be able to shirk its responsibility by merely declaring the cuts to be dictates devised by a malicious external power. That is Papandreou's gamble.

The referendum would, of course, become superfluous if the Greek opposition were to assume a constructive and responsible role. But that's not what's happening. Setting aside the antediluvian Left, the real scandal in the drama is the conservative New Democracy party itself.

New Democracy won't help

After the New Democracy prime minister Kostas Karamanlis was roundly defeated at the polls two years ago, New Democracy chose the second-grade politician Antonis Samaras as its new chairman. It was he who, in the early 1990s, forced the collapse of the government of the time when, as foreign minister, he torpedoed a solution to the ridiculous row over the name of Greece's neighbor Macedonia.

Nowadays Samaras is fighting a bitter battle against budgetary consolidation and has promised a renegotiation of the unpopular bail-out package. Despite this, New Democracy continues to be courted by the EU's alliance of Christian Democratic and moderate conservative parties, the European Peoples' Party.

And the EU, the European Central Bank and the International Monetary Fund have still not publicly spelt out that, under current circumstances, no more talks with Greece are possible.

And, now the country is teetering towards a referendum instead of being led toward a healthy political compromise.

Author: Spiros Muskovou / ipj
Editor: Michael Lawton