Wednesday, 2 November 2011

Falling into the Abyss - A Greek Tragedy

From economic and financial turmoil to the brink of political catastrophe, you've got to hand it to the Greek Governemnt - they're not doing anything by halves.

Prime Minister George Papandreou's snap decision to hold a nation-side referendum on the latest EU debt rescue package caught everyone by surprise. The negative reaction of European stock markets on hearing the news yesterday bore testament to that.

It is a quite incredible twist in events that has seemingly stolen from the jaws of an improbable victory, a catastrophic defeat for Greece.

The latest EU bail-out deal was probably as good as Papandreou could've hoped for. It would've meant a 100bn-euro loan to Athens and a 50% debt write-off of its current debts. But of course, the problem with that is the planned austerity measures that go hand-in-hand with this financial support. The cuts in pensions and public sector wages and the lay-off off thousands of workers has understandably caused an angry response from the populace to these measures that have already gone before and those that lie ahead if this additional package were accepted.

Papandreou: On a wing and a prayer?

Papandreou's Political Gamble
The Greek Prime Minister however has decided to play the biggest gamble by risking the loss of the package afforded to him by the EU in the face of the angry reaction that he has received at home.

The likelihood is that the referendum could well be lost and with it surely, the last remnants of Greece's place in the 17-nation Eurozone. In the short-term, the financial bankruptcy of a nation that this would presumably precipitate would be worse than anything currently being experienced by the residents of Greece. Though having said that, the longer-term repercussions once a new and more reasonable level has been found for the now reconceived Drachma may be more hopeful for a weary and tired nation.

Short-term pain but long-term gain then for Greece if they were to refuse the bail-out and force an early exit from the Eurozone? I'm no economist but this lay-man asks the question.

Greek Elections?
Yet, we may not have a referendum after all.

On Friday, Papandreou faces a Confidence Motion in his governemnt which he himself has tabled. This is a Government that now has a wafer-thin majority of just 2 in a Parliament of 300. It also includes a number of his own party members who have openly called for him to quit as leader. If he loses the vote on Friday and it could well happen, then there will likely be a snap general election. This will cause even more turmoil at a time when what is required is steady and calm leadership to steer a nation through unprecedented waters.

He may of course win the vote on Friday and still go on to lose the referendum which in itself will surely result in the fall of his government and fresh elections anyway.

Europe Awaits
But of course the repercussions of Greece's decision doesn't just remain within its own borders. The remainder of the Eurozone and indeed the remainder of the membership of the EU including Britain, await with baited breath, every nuanced move made in these delicate and dangerous times.

The reaction of the markets yesterday was not a positive sign and the biggest worry now is that until a referendum is held, the uncertainty in the markets is only going to increase. The talk is of a January referendum with some optimistically holding out for one as early as December. Either way, the best-case scenario is that the European markets have 4 weeks of limbo during which the situation can very easilty deteriorate. At worse, it could be the New Year before the situation becomes clearer.

The Abyss
Papandreou has played his ace card - the card that gives the final authority on Greece's economic future to the people of Greece. It is in fact, rather apt that he has done so when you consider that it was in Ancient Greece that the concept of direct democracy took shape.

But it is the greatest of gambles. He may win his confidence motion on Friday and win around a sceptical public to support the package in the referendum. If he does, his decision will be viewed by many as a masterly show of cunning resolve.

But is it? What it has done is exacerbated the sense of crisis that surrounds this whole sorry tale. A tale that began when Greece was allowed entry in the Eurozone in the first place. French President Sarkozy was candid in speaking to the media recently when he said that the decision to allow Greece into the Eurozone in hindsight now looks like a mistate. Without question, he was correct.

But the past can not be altered. The future however is another matter but we do not know what that future has in store for Greece and for the rest of Europe.

Greece stands at the abyss and in my opinion now, it's going to fall right into it. This is the greatest tragedy of all.

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