Greece may hold referendum on Eurozone membership

[Lord Zentei]

The question for all who are in favor of the referendum: How is it going to help Greece to potentially exit the EMU? After all, the foreign debt would still be held in Euro.

It won't. It will allow the people to take the path that they prefer and subsequently hold responsibility for the outcome, rather than having the choices forced on them by bureaucrats. Or, if you prefer: it will prevent them from being able to blame them if all goes to hell anyway and/or for the hardships that they have to endure if they accept the deal. As it stands, there are riots in the streets, and wasn't there talk of junta and revolution a few posts ago? It's also a matter of legitimization in the public eye.

[K. A. Pital]

The question for all who are in favor of the referendum: How is it going to help Greece to potentially exit the EMU? After all, the foreign debt would still be held in Euro.

I think it won't "help" Greece to devise a mechanism to exit the EMU, but at least give a signal that one should be devised and Greece could be able to exit the EMU (if it so desires) in a more or less orderly fashion. It would be much worse if any of the periphery nations suffer a bankrupcy while still in the EMU, I think.

[MarshalPurnell]

I think it is all but inevitable that if Greece rejects the bailout terms via referendum or the collapse of the PASOK government that it will ultimately repudiate the foreign debt and take the hit for defaulting. Countries defaulting on their foreign loans has happened from time to time and the consequences are generally understood and well-known, and quite survivable in the long term. The question is whether or not this inevitably leads to an exit of the Euro for Greece, and how badly events playing out this way in Greece hurts Italy and Spain, who are too politically central to the Euro to be allowed to take a similar course.

[Thanas]

The question for all who are in favor of the referendum: How is it going to help Greece to potentially exit the EMU? After all, the foreign debt would still be held in Euro.

I think it won't "help" Greece to devise a mechanism to exit the EMU, but at least give a signal that one should be devised and Greece could be able to exit the EMU (if it so desires) in a more or less orderly fashion.

They can already quit the EMU if they so wish. Quitting the EMU, at least in the legal sense, is the easiest thing a state can do.

[K. A. Pital]

They can already quit the EMU if they so wish. Quitting the EMU, at least in the legal sense, is the easiest thing a state can do.

They can, but the government probably fears that if it does so without the consent of the people, it will take blame regardless and economic troubles will cause massive upheavals. Where they might lose power quite simply, and in a non-pleasant way. So they need a referendum. I think that makes at least some sense not to rely on the government alone in such decisions; too many measures were taken by the Greek parliament without asking the people via referenda, and it is evident that protests are gaining strength. I don't think they had much choice but a referenda if they wanted to maintain some semblance of legitimacy.

[The Duchess of Zeon]

The Drachma and the Euro have an eternally fixed exchange rate by the law implemented to implement the Euro in the 1990s. The Greeks could, I think, print huge quantities of Drachmas and start paying off their Euro debt with them right up until an emergency meeting of the other members of the monetary union changed the law. This would cause inflation of the Euro and help them pay off a large portion of the debt for nothing; then they can default on the rest. This would of course be a massive dick move, but I wouldn't completely rule it out.

[Thanas]

The Drachma and the Euro have an eternally fixed exchange rate by the law implemented to implement the Euro in the 1990s. The Greeks could, I think, print huge quantities of Drachmas and start paying off their Euro debt with them right up until an emergency meeting of the other members of the monetary union changed the law. This would cause inflation of the Euro and help them pay off a large portion of the debt for nothing; then they can default on the rest. This would of course be a massive dick move, but I wouldn't completely rule it out.

If they leave the EMU, I cannot see that law remaining in any way in force. The market will simply not exchange drachmas for Euros at that fixed rate nor will the other states not devise countermeasures to that.

The situation will be the same as with the soviet dictatorship trying to fix such an exchange rate between the Deutsche Mark and their worthless currency. It failed.

[Lord Zentei]

Looks like the cabinet has voted to hold the referendum.

Athens, Greece (CNN) -- Greece's cabinet voted Wednesday to support Prime Minister George Papandreou's call for a referendum as soon as possible on the latest bailout plan, as Europe's stock markets watched anxiously to see what might happen next.

The vote was unanimous, though some of the ministers expressed criticism prior to casting their votes, CNN affiliate Mega Channel reported.

The cabinet vote came hours before German Chancellor Angela Merkel, French President Nicolas Sarkozy and senior figures from the International Monetary Fund and European Union were to meet Wednesday with Greek officials at an emergency meeting in Cannes, France, ahead of the G-20 summit.

German and French markets rallied slightly Wednesday after tumbling Tuesday on the news of the referendum call, while London's FTSE remained fairly flat as of midday trading. The Dow Jones Industrial Average index opened slightly higher Wednesday.

Papandreou is seeking public backing from the Greek people for last week's bailout deal, which took months to reach.

But the move created turmoil in domestic politics and angered his European counterparts.

A "no" vote could theoretically force Greece to crash out of the euro and send shock waves through the global financial system.

Greek Foreign Minister Stavros Lambridinis told CNN he was confident the Greek people would vote "yes," and that they were "fanatic supporters" of Europe.

"Everyone is getting a bit tired of doubting the wisdom of the Greek people and their commitment to Europe," he said, adding that Greece had proven its dedication in the painful measures it has already taken.

Lambridinis said he hoped the referendum would take place as soon as the details of the bailout deal agreed to last week were finalized.

Several of the most senior military leaders in Greece, meanwhile, have been replaced.

The Government Council for Foreign Affairs and Defense, which Papandreou chairs, decided on "sweeping changes in the armed forces' leadership" on Tuesday, the Athens News Agency reported. The council replaced the general staff chiefs for the Greek Army, Navy and Air Force, the news agency said.

The news agency did not cite a reason for the changes.

The deal reached last week would see the country's sky-high debts cut in half, but it comes with strings attached, which have led to angry demonstrations in the streets of Greece.

The announcement of the referendum rattled Papandreou's hold on power, as a lawmaker defected from his party, leaving him with a majority of only two in Parliament.

Milena Apostolaki, who was an influential figure in the party, said Papandreou had made "an erroneous political decision" in calling for the referendum.

"It jeopardizes the efforts and the painful sacrifices that are made by the Greek people," she told CNN Wednesday.

"It would set high risk on the European perspective of the country and also divides the nation, and that's why I believe in these extremely difficult days we only have to contain the crisis and to make all the sacrifices of the Greek people worthwhile. That must be the one and only priority."

The prime minister has called a confidence vote, separate to the referendum on the bailout deal, for Friday.

Sarkozy and Merkel issued a terse statement on Tuesday saying they were "determined to ensure the full implementation, without delay, of decisions adopted by the summit, which are necessary now more than ever."

White House spokesman Jay Carney struck a similar note, saying Papandreou's move reinforced the need for Europe "to elaborate further and implement rapidly the decisions they made last week."

Greece's former deputy finance minister, Petros Doukas, a member of the opposition New Democracy Party who is not currently in office, told CNN he doubted the referendum would take place.

Papandreou is under enormous pressure from Europe, the markets and opposition forces within Greece to backtrack on the proposal, Doukas said.

He described Papandreou's actions as a political gamble that had gone wrong, with the prime minister having tried to make the opposition parties share the pain of unpopular reforms. He suggested Papandreou would have to call elections or stand down as leader, as Greece was "not governable" with him as prime minister.

Greece's opposition leader, Antonis Samaras, called Tuesday for a snap election, but it is unlikely he has the votes to force one.

Elena Panaritis, a fellow PASOK lawmaker who advises Papandreou on economics, said she would support Papandreou's confidence vote, saying the prime minister had been under heavy political pressure from inside and outside his party.

International lenders are demanding that Athens raise taxes, sell off state-owned companies and slash government spending, which would mean firing tens of thousands of state workers.

The Institute of International Finance, a global association representing many of the world's biggest banks, reaffirmed its commitment Tuesday to the bailout agreement reached last week, saying it would work closely with all parties to implement it.

The European debt crisis claimed its first American victim shortly before Papandreou announced the referendum on Monday, as MF Global filed for bankruptcy protection, leaving top Wall Street creditors holding more than $2 billion in debt. The commodities and derivatives brokerage was run by ex-Sen. Jon Corzine, a former head of Goldman Sachs.

Constantine Michalos, chairman of the Athens Chamber of Commerce, said Papandreou's referendum move had taken everyone by surprise.

As a consequence, he said, "Greece is facing a credibility gap as a result of the problems that have been created both on a political level and on a financial market level."

Michalos also said he saw little point in Papandreou holding a confidence vote this week if the bailout deal, which was reached after top-level negotiations in Europe, could be overturned by the Greek people just a few weeks later.

The planned referendum casts a shadow on the hard-fought deal that would allow Greece to write off as much as 50% of its debts to banks.

The agreement for private lenders to scrap half of Greece's debt is worth 100 billion euros to Athens, and comes with a promise of 30 billion euros from the public sector to help pay off some of the remaining debts, making the whole deal worth 130 billion euros ($178 billion).

No date has been set on the vote, although local news reports say the referendum could come in January.

A "no" vote threatens to unravel the deal, which was greeted last week with fanfare as a way to keep debt woes in Greece and other European nations from spilling across other borders, threatening the 17 nations united under the euro currency.

A weekend survey in Greece found nearly 60% opposed the debt deal reached last week in Brussels.

But other surveys have shown a more complicated picture.

A survey carried out last week by Kappa Research for the Greek daily newspaper To Vima showed a majority of Greeks wanted a referendum on the international rescue plan, and that more would oppose it than accept it.

But in the same survey, 70% of Greeks wanted to stay in the euro, according to RBS European Economics -- a result that may not be possible if they vote "no" on the referendum.

"(It) clearly opens a can of worms because the referendum vote could go one of two ways," said Frederic Neumann, a senior economist for HSBC.

"If approved, a vote of confidence in the government's handling of the situation ... if calmer heads prevail and it can rationally be explained to the public, I wouldn't discount the measure being approved."

But, until the referendum is passed, there is added uncertainty, he said, adding, "That's just an added headache."

Besides the Greek debt-reduction plan, last week's European Union deal pledged to quadruple the EU's bailout fund to about $1.38 trillion and to raise the capital required to help cushion the region's banks from financial shocks.

[Thanas]

Taking bets on how quickly Merkel reenacts Matthew 27:24......

[Edi]

Should Greece Reject the Bailout? by Robert Reich

Which do you trust more: democracy or financial markets?

Greek Prime Minister George Papandreou decided in favor of democracy Monday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.

(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)

If Greeks 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.

If Greeks 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. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.

Shouldn’t Greeks be able to make this decision for themselves?

Of course, if Greek defaults on its loans, global investors (fearing that a default in Greece sets a dangerous precedent) may yank their money out of Italy. This would almost certainly bust several big European banks – and generate panic on Wall Street. That’s why Tim Geithner has been pressing Europe to bail out Greece.

We’ve been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.

The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street – with no strings attached. Of course Congress hastily agreed. Hank Paulson, Ben Bernanke and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.

So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences.

If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.

But Americans weren’t really consulted. It was an inside job.

As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.

And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to – going into effect a little over thirteen months from now – or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.

So which is it? Rule by democracy or by financial markets? Based on what’s happened in America, I’d choose the former.

That's a slightly differing opinion and I can't argue with a straight face that he doesn't have points. The easiest solution would be if there was a mechanism for kicking countries out of the Euro-zone forcibly if they can't abide by the conditions required. Right now the longer this ridiculous circus goes on without resolution (either a bailout according to the deals already made, or Greece getting thrown to the wolves and left to fend for itself), the worse things are going to get. Irresponsible lenders shouldn't get bailed out by everyone else, because their profits should not be guaranteed. And irresponsible spenders don't have any more a right to a bailout without strings.

One wonders if it were possible to sue Goldman-Sachs for all the costs of the bailout because they knowingly enabled Greece to cook the books so that the eurozone would accept them.

[Thanas]

Anybody who thinks Obama will let Greece sue a US company, when the finance minister was the CEO of that company and said company has filled nearly all positions in the fiscal policy sections with cronies....well, they should contact me for a great offer on some tomato fields in the Sahara.

[Edi]

Anybody who thinks Obama will let Greece sue a US company, when the finance minister was the CEO of that company and said company has filled nearly all positions in the fiscal policy sections with cronies....well, they should contact me for a great offer on some tomato fields in the Sahara.

True. I know it's not going to happen, and if anything of the sort did, it would have to take place in Europe. They do have subsidiaries here and Europe is also where those crimes took place. Of course, just the act of initiating those proceedings would cause a shitstorm with the US, so it will have to remain in the realm of wishful thinking.

As far as I'm concerned, Greece can go fuck itself and if Italy and others follow, so can they. Anybody who lent money irresponsibly should be made to eat those losses so that shit can get cleared out of the system, because it has been conclusively shown during the past year that whenever anything is done to bail out such actors, the markets will freak out two weeks later (at the latest) and demand ever more bailouts from the taxpayers.

If things here do go to shit, I hope the backlash from the exposure wipes out any and all of the big Wall Street actors who have been involved in getting things to this pass.

[K. A. Pital]

Of course, just the act of initiating those proceedings would cause a shitstorm with the US

Indeed. Most of the coercion is really a soft form of the unrealized threat: "Challenge us? You really think you dare to?". The consequences can be vague and unclear, but they scare those in power. The US does not need to threaten Europe with guns to keep Europe silent over its crimes or even a willing accomplice, as it has been with secret CIA prisons or the pressure on Spain, etc. It does not need to lay out the threats, it just keeps the vague threatening posture at all times and you can't do shit.

That doesn't mean the threat of U.S. retaliation isn't real:

In a 2007 cable, the US ambassador to France, Craig Roberts Stapleton, recommended "retaliation" against European "targets" in order to defend Monsanto sales of genetically modified organisms (GMOs) in Europe, where controversy over GMOs is strong.[32] In the cable, the French decision to suspend Monsanto's MON 810 patented seed product line was described as "damaging" and not "science-based".[33] The French government's "apparent recommitment" to the precautionary principle written in the French Constitution was also referred to as "damaging".[33] In the cable, Stapleton stated, "Country team Paris recommends that we calibrate a target retaliation list that causes some pain across the EU since this is a collective responsibility, but that also focuses in part on the worst culprits. The list should be measured rather than vicious and must be sustainable over the long term, since we should not expect an early victory."

How the fuck anyone could use such language and this shit not cause a massive shitstorm is beyond me.

I guess the problem is not the US being assholes as they often are. It is Europe's complacency.

[Lord Zentei]

Realpolitik is all about national interest, and trade wars still happen, albeit covertly. News at 11. The US simply has more ability to throw its weight around than most. I don't doubt that other nations do the same to the extent that they're able.

That's not supposed to be apologism, BTW.

[Guardsman Bass]

The question for all who are in favor of the referendum: How is it going to help Greece to potentially exit the EMU? After all, the foreign debt would still be held in Euro.

The government would probably just default on most of its debt in Euros.

[K. A. Pital]

Realpolitik is all about national interest, and trade wars still happen, albeit covertly. News at 11. The US simply has more ability to throw its weight around than most. I don't doubt that other nations do the same to the extent that they're able.

That's not supposed to be apologism, BTW.

If that's sort of an economic combat zone between Europe and the USA, or some other point of rivalry, it is only rivalry if the other guy hits back. If Europe just keeps being a punchbag for the USA, that's not "combat", that's the USA kicking Europe's ass on every single issue possible to imagine and Europe taking it like a bitch.

In the US-China trade issue you at least see Chinese officials present a dissenting viewpoint. And resist US pressure. Europe just does what's being told.

[Teebs]

the USA, or some other point of rivalry, it is only rivalry if the other guy hits back. If Europe just keeps being a punchbag for the USA, that's not "combat", that's the USA kicking Europe's ass on every single issue possible to imagine and Europe taking it like a bitch.

In the US-China trade issue you at least see Chinese officials present a dissenting viewpoint. And resist US pressure. Europe just does what's being told.

Do you have some evidence for Europe simply doing as it's told in trade disputes with the US? I've always had the impression that it's an area in which Europe is quite willing to play hardball if it considers it to be in its interests. .

[Thanas]

Yeah, as the number of trade wars would imply.

[J]

It appears a referendum is scheduled for December...

CTV News

Greek bailout on hold pending December referendum
Updated: Wed Nov. 02 2011 20:38:36
CTVNews.ca Staff

Greece will hold a controversial referendum in early December that will determine whether or not it stays in the eurozone, European leaders said on Wednesday.

European leaders also said that Greece won't receive any rescue loans until after the referendum.

Greek Prime Minister George Papandreou was flown to France for an emergency meeting on Wednesday to explain his decision to hold a surprise referendum on a bailout deal that took months to work out.

German Chancellor Angela Merkel, French President Nicolas Sarkozy and top officials from the European Union met with Papandreou, gathering at the Palais des Festivals, site of Cannes' famous film festival.

"The referendum…in essence is about nothing else but the question, does Greece want to say in the eurozone, yes or no?" said Merkel at a press conference.

On Monday, Papandreou announced plans to hold a referendum that will give Greek voters the choice of whether or not to approve the bailout that is necessary to prevent their country from going bankrupt.

Papandreou's plan to let the Greek people vote has riled financial markets. There are fears that Greeks may vote against the government's tough austerity plan and send markets into further turmoil.

Luxembourg Prime Minister Jean-Claude Juncker announced after a meeting with Papandreou on Wednesday that the referendum will be held on Dec. 4. Sarkozy said the vote would be Dec. 4 or 5.

The chief of the International Monetary Fund, Christine Legarde, said, "I hope that this whole thing can be closed and completed by mid-December. I think it's important from a cash point of view."

Greece's pending bailout resulted from weeks of negotiations by European leaders, who recently hammered out a deal to recapitalize major banks, boost a bailout fund and to have bondholders accept a writedown on their Greek holdings.

With so much work put into the debt deal, Papandreou's sudden call for a referendum has raised the ire of many European nations, particularly France and Germany.

"They're in an absolute rage about this, because France and Germany are the prime sponsors of the new Greek bailout," said Eric Reguly, a Globe and Mail correspondent who spoke to CTV's Canada AM on Wednesday.

"And this referendum choice came right out of the blue and it's thrown the whole eurozone into turmoil."

So far, Papandreou has not backed down from his position, which he claims is a democratic necessity.

"We will not implement any program by force, but only with the consent of the Greek people," Papandreou told his Cabinet, according to a text of his remarks that was released to the public.

"This is our democratic tradition and we demand that it is also respected abroad."

He said that any referendum will have "a clear mandate" and will give a sense of how the Greek people view their future in the European Union.

"The dilemma is not ‘this government or another one,' the dilemma is ‘yes or no to the agreement,' 'yes or no to Europe,' 'yes or no to the euro,'" Papandreou said.

But with Greece's lack of ability to handle its debt crisis on its own, Reguly said that other European countries likely feel that Athens is not in a position to make demands.

"France and Germany would never admit this, but they consider Greece to have absolutely no sovereignty now because it cannot pay its own bills and they think they can tell Greece what to do," Reguly said.

"Guess what? The Greek government is saying: 'Forget it. We still have sovereignty and we can decide whether to have a referendum or not.'"

Papandreou's referendum pitch has also prompted criticism from within his own party.

One lawmaker has defected from the Socialist government, while others have spoken out against the prime minister's decision.

Socialist deputy Hara Kefalidou said Papandreou's referendum plans raise doubts about whether or not the government "is striving to save our country from bankruptcy."

With files from The Associated Press

[wautd]

"This is our democratic tradition and we demand that it is also respected abroad."

Yes, or how a single person's dickery can treathen the economic stability of a whole continent. Very democratic.
When your house is on fire, you're not going to discuss whether or not to accept the offered help and come back with the answer after a month. You take your damn responsibility as the democratic elected leader.

[Edi]

"We will not provide any relief funds by force, but only with the consent of the [insert eurozone country here] people" is a perfectly valid response to that. Let's see the bailout put to a national referendum in Finland or anywhere else and let the Greeks respect that Democratic tradition.

It's what should have been done months ago.

[K. A. Pital]

"This is our democratic tradition and we demand that it is also respected abroad."

Yes, or how a single person's dickery can treathen the economic stability of a whole continent. Very democratic. When your house is on fire, you're not going to discuss whether or not to accept the offered help and come back with the answer after a month. You take your damn responsibility as the democratic elected leader.

The "economic stability" of compradors, liars and shameless bribe profiteers like Greek officials and European banks who were in cahoots with them deserves nothing. The democratic referendum deserves respect. I'm in Europe and even I can see that for once, Greece is doing the right thing - reluctantly and probably more out of ass-covering than a noble commitment to democracy, but intent is not relevant when the outcome is what we need.

Europe's "house" has been on fire for quite a while when all the periphery nations accumulated debt beyond their capabilities and bankers chose to invest there knowingly setting up a debt trap to be once again bailed out from public funds like they were in 2008; in case of "volatility", rely on the government to pay back your debt with interest, what a nice new banking strategy!

Fuck them. Fuck all of them.

[Thanas]

Yes, because clearly throwing the EU under the bus is not supposed to be considered when salivating over the punishment of those evildoers.

[Gunhead]

Basically what Edi said. This shit has gone far enough and while I was for the bailouts in the past, my opinion is quickly going to the "Fuck'em" direction. I just hope the EU leaders have the balls to stay adamant and will not let greek stall for further concessions about their austerity measures, which they should have implemented before they ended up in a hole. Now there's talk about their government collapsing and if this happens before they get a decision to accept the bailout package it's time to cut out the cancer and leave them fend for themselves.

-Gunhead

[K. A. Pital]

Yes, because clearly throwing the EU under the bus is not supposed to be considered when salivating over the punishment of those evildoers.

EU != EMU. The monetary union and common currency could have been devised as a "tool for good", but it has been abused by wrongdoers in a fashion which was exactly predictable. So what if the EMU self-destructs? Big deal. I go to Poland and I pay with zlotys, I go to Northern Europe and I pay with kronor of the respective nation I'm travelling to, I go to Britain and pay with GBPs. A lesson has to be learned the hard way if it can't be learned the soft way.

Being benigh to the European Union doesn't mean being benigh to the Euro. I don't make a fetish out of money.

As you see, many posters admit that further bailouts are no longer welcome not just inside Greece, but outside Greece too.