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Wednesday, November 2, 2011

Greek Prime Minister Papandreou Goes Rogue

     So what is his game anyway? That's what the Euro leaders as well as many around the world now wonder. Yet it makes sense in a way. This is a desperate audible to maybe turn public opinion back to him.

     http://www.cnbc.com/id/45129007

    Maybe he will be more popular in losing power than he was in holding it. It certainly has thrown Greek politics including his own Socialist party for a loop.

    At the minimum it shows that he is not as insensitive to public opinion as might be suggested by the endless austerity packages he has pushed. http://news.yahoo.com/greece-no-good-options-left-134600556.html

    While most leaders are critical of his move and it does seem that, as his own finance minister said-who was also sandbagged by this announcement-he could have at least let the Euro leaders know before announcing this, it seems that he has been taking his drop in popularity pretty hard.

    "A man used to popularity and acclaim even when his party languished in opinion polls, Papandreou may have found the public acrimony following from his austerity measures a bitter pill to swallow. He has looked increasingly isolated, attended by a dwindling group of close aides."

    "Media reported that an offer in June to step down if his conservative opponent agreed to a coalition government came directly after he was booed on the street."

    "Pressure increased from the streets, where protesters clashed violently with police, and from his own deputies, who said the latest wave of austerity measures agreed last month was the last they would approve."

     "Last month, Papandreou was forced to expel a former minister and family friend from the party group for voting against part of the austerity bill, reducing his parliament majority to 153 out of 300 seats."

     "Pressure increased from the streets, where protesters clashed violently with police, and from his own deputies, who said the latest wave of austerity measures agreed last month was the last they would approve."

     Yet it seems there may be a snap election calling for his resignation before the referendum is voted on:

     "Political analysts were baffled by the referendum move they saw as an elaborate way to fall on one's sword. With socialist deputies demanding a snap election or Papandreou's resignation, it seems likely the country will head to the polls before any referendum."\

     In the end it may simply be as there are no good options maybe Pandreou is trying at least to escape fully owning these austerity measures.

     "The stunning decision by Greece Prime Minister George Papandreou to hold a referendum on the $178 billion European bailout package has laid bare the miserable economic options the country has in front of it. On Wednesday, Papandreou's move to hold the referendum was swiftly rejected by a slew of Greek lawmakers, The New York Times reports, and raises the possibility that he will be removed from power in a no-confidence vote to be held on Friday. Why pass the decision on to the people? Papandreou is casting it as a democratic move, empowering the people."

     Nevertheless it may simply be he's trying to punt as there are no good options-let posterity remember someone else, is his thought process.

     Consider Greece's choices:

     "Accept the bailout Though Angela Merkel and Nicolas Sarkozy would prefer Greece take the rescue package they labored over, Robert Reich, former labor secretary under President Clinton, explains why it's a tough pill to swallow. "If Greek voters accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further," he writes in Guernica.

    Stay in the euro zone If Greece accepts the bailout, it would likely stay in the euro zone for a number of years. As The New Yorker's John Cassidy explains, that would ensure many more years of austerity and potential hardship. "If the Greeks stay with the euro? Even after the writedowns that were agreed to as part of the latest deal, the country’s debts would be very large: at least a hundred and twenty per cent of G.D.P., and probably more," he writes. "Tethered to the European currency, the only way for Greece to grow and prosper would be by reducing its labor costs—i.e., cutting wages—relative to other European countries and making its exports more competitive. With its fiscal policy dictated by Berlin and Paris, this would involve many more years of grinding austerity."

     Reject the bailout  Ditching the bailout has its downsides as well, explains, Reich. "If Greek voters reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too."

     "Leave the Euro zone Although not a given if Greece rejects the rescue package, the country may very likely decide to exit the Euro zone and return to the drachma. Landon Thomas, Jr. at The New York Times explains the downsides to that. "Default on the nation’s $500 billion in public debt would become a certainty, depositors would take their money out of local banks and, with a sharp devaluation of as much as 50 percent, inflation would loom. A return to the international credit markets would take years," he writes. Additionally, John Cassidy notes that "the country’s banking system would probably collapse—it’s pretty much a basket case already—inflation would rise, and there would be a period of chaos."
  


   

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