Thursday 3 November 2011

EU or eurozone exit and chaotic default for Greece?

Few have ignited as much pan-European debate as George Papandreou, who remains prime minister of Greece at least until Friday evening. Not only mainstream media are full of reports, but multilingual is teeming with contributions from eurobloggers. Here are a few euroblog posts.

Lost in EUrope wanted to see the Greek referendum announcment as an opportunity to establish rules for orderly secession from the eurozone and for a European Monetary Fund (in German).

Eurosearch noted that after years of talking about how to make the EU more democratic and countless pages written to explain the democratic deficit, it boils down to the crucial possibility to choose between governments (‘throwing the bastards out’) and policies which is still, at the EU level, not present.

Karpfenteich opposes buying of state bonds by the European Central Bank (in German).

Popular protests against austerity measures were reported on Global Voices.

What happens next? Kevin Featherstone outlined scenarios from early elections to the alternative outcomes of a referendum.

Gunnar Hökmark MEP described Greece as increasingly ungovernable and beyond help (in Swedish). Without outside help there is little stagnant and uncompetitive Greece can finance on its own.

Le Taurillon interviewed the economist Le Héron, who described Greece as a weak and corrupt state, but its uncompetitive economy would gain little from secession. The bailout funds are still not sufficient in case of contagion. At the European level better economic coordination, a substantial budget and a wider ECB mandate are needed (in French). reported Papandreou's surprise announcement as a risk to the G20 summit plans and the eurozone rescue effort. EU leaders in Cannes would give the Greek PM a hot reception (in Swedish).

The blog of the ECFR in Madrid reported that China would not rescue the eurozone through the EFSF or the ESM in the current turmoil, anyway not without being recognised as a free market economy in the WTO. Participation by the BRICS through new funds for the IMF is possible, but they want more voice (in Spanish).

According to Renaud Dehousse on Telos the Greek referendum announcement showed shocking irresponsibility. The structural weaknesses of leaders with national mandates and unanimous decision making must be replaced by majority voting and institutions equipped to act in the general interest (in French).

Clem Chambers wondered if a Greek tradegy is in store, after all. News that a Greek referendum could see that country choose to default on debt, despite the best efforts of Euro leaders to save it, sent markets into fresh free fall come the morning of 1 November.

The European Citizen saw Papandreou's decision as a massive political gamble. A yes would mean buying into the process so far and imply support for however it evolves. A no would mean the end to the loans, complete default (along with the instant austerity that the inability to fund the deficit implies) and probable exit of the Eurozone.

Honor Mahony brought the suffering of the Greek people to the fore, as an explanation for giving them a say.

Maxime Larive saw Papandreou's referendum announcement as a very rational move from a politician trying to save his career by avoiding a personal failure and a probable demonization by Greek fellows. Referring to a post by Ronny Patz, Larive concluded that the European citizens are the missing element for a successful Union. Ultimately, the EU and the euro will survive and be successful if Europeans decide its future and shape.

Marco Zatterin reported that without a firm undertaking, it is impossible for the IMF to pay the sixth tranche of the ongoing Greek rescue, amounting to €8bn. In mid December the state coffers of Greece will be empty (in Italian).

Álvaro Millán wrote that the Greeks have every right to decide about their future, but their decision affects all Europeans, turning Papandreou's proposal into a nightmare for us all (in Spanish).

Yanis Varoufakis reckoned that the referendum is a shoddy, strategically ill-fated, morally corrupt and politically damaging ploy. Papandreou has done enough harm to the Greek nation and Europe. He should resign.

Kati Suominen writes that the G20 summit in Cannes is going to be hijacked by Europe's troubles, but she paints a broader canvas of the international challenges.

The Financial Times live blog on the eurozone crisis ended at midnight local time after reporting from Cannes, Rome and Athens that the €8bn tranche of IMF and eurozone aid is suspended until the world knows if Greece wants to abide by the summit deal. The FT promised to continue coverage in the morning.

The eurozone shows Greece the door to exit, reports Jean Quatremer, who states that the leaders refuse to be taken hostage by Greek internal politics. Papandreou can freely consult his people, but it is for him to draw the conclusions. The referendum could now take place 4 December 2011, but Quatremer doubts if Papandreou will survive the vote of confidence on Friday.


If prime minister George Papandreou wanted to blackmail the eurozone leaders and international lenders, he has failed. There is no way they can extract more sacrifices from European taxpayers or others to keep him in power.

The Greek parliament holds the keys to the fate of the Pasok government and the possible referendum.

Referendum or elections, the Greek people face stark choices.

One is chaotic default and exit from the European Union or a new procedure to leave the eurozone separately.

The second is prolonged misery according to the agreed bailout regimes and later additions.

Either way, Greece still needs to become a functioning state and competitive economy.

Left on the table are the other euro area dominos needing to be sorted out, but not much time...

Without robust and democratic institutions at European or eurozone level there is, however, no end in sight to the interminable row of failed attempts and partial fixes.

Ralf Grahn

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