Alastair's Blog

Return to:  Blog | Articles | Videos RSS feed

Did nobody at the eurozone crisis summit ask Papandreou about the R-word?

Posted on 1 November 2011 | 11:11am

Did the word ‘referendum’ cross anyone’s mind, let alone anyone’s lips, at the eurozone crisis summit last week?

It certainly didn’t appear in any of the coverage I read. Could it be, once more, that the desire to get the big picture back in focus – not an ignoble objective – led to eyes being diverted from detail which required attention?

The summit appeared to do the trick with the much-vaunted, over-mighty markets, which settled down a little, and the political leaders seemed to be breathing a little more easily. But now Greek PM George Papandreou has got markets across the world and politicians across Europe all atwitter again by announcing that the Greek people will have the final say on the latest bail-out package. What did I say the day after the summit – that delivering the words of the agreement was the easy bit, but that making it happen did not automatically follow. This is a very good example of what I had in mind.

Mr Papandreou barely has control of his own Parliament, let alone a public opinion fed up with the austerity and the incompetence that led to it. So the beaming confidence he displayed in announcing a move that appears to have taken his fellow EU leaders by surprise may well be misplaced. One assumes that if he loses the referendum, exit from the euro must then seriously be on the agenda, which is what his colleagues were desperate to avoid.

Which brings me back to my original question, and why nobody appears to have asked it. Amid the post-summit smiles, had nobody seriously thought to ask Mr Papandreou whether he would be able to get the deal through, and how? And did nobody think to ask whether the R-word might come into play?

It all seems very odd indeed, and feels alarmingly like nobody really had a grip of events at the summit, just an overwhelming desire to agree a plan that would get them through the current turbulence. Mr Papandreou has ensured the turbulence will endure.

  • Mark Wright

    Papandreou has pulled a masterstroke. If Greece is dumped out of the Euro they will be facing far worse measures than those currently in the pipeline. Except this time he’ll be able to blame the Greek people themselves for it’ll be what they themselves wanted and voted for. Genius!

    Severe austerity cuts under the guise of ‘choice’ and ‘democracy’. Still, at least in the UK our government wouldn’t attempt to……oh.

  • Curious – the Scots are – finally, mayby when Salmond feels like it, to have a referendum, the Greeks are to vote but the Europhobe Tories dithered and ran away from one, for the time being at least.
    An article in yesterday’s El Pais, Spain, by Paul Krugman originally in the New York Times.
    Iceland, the way we did not take.
    how the public are meant to bail out the banks, accept massive unemployment, austerity and massive cuts to social programmes. We were told there was no alternative. Instead they let the banks fail and saved the wellbeing of the people. The pain people elsewhere in Europe are suffering to save the banks is not necessary – there is an alternative.

    If one consider’s the growth pattern of Argentina after default there are clear alternatives to succombing to the power and ego of the banks. Argentina is prospering, relatively, and is free from the social issues engendered by slash and burn cuts that many are experiencing and will experience. Chile is being greatly perturbed by social unrest through mindless cuts to education, most especially university provision.

  • Mark Colburn

    It’s simple, they expected the Greeks to be supplicants and just take what was given to them. I suspect it never crossed their minds that the Greeks might say no.

  • Olli Issakainen

    It is impossible to save the eurozone without a break-up of the euro or the United States of Europe.
    Euro´s fatal flaw is monetary union without fiscal union. There is a 30% intra-EMU currency misalignment because of different levels of competitiveness.
    The plan of the globalists is now to pump all possible money out of Germany and then let the whole system collapse.
    IMF´s SDR and Bancor currencies will replace the dollar and euro.
    In Spain, unemployment is 21.5%. European Central Bank (ECB) has made things worse by tightening monetary policy.
    Portugal is already under EU-IMF administration. Portugal needs a 40% devaluation against Germany. Instead, it is attempting internal devaluation by cuts. But you cannot deflate economy back to viability with total debt of 350% of GDP.
    M1 deposits in Portugal have fallen at an annualised rate of 21% over past six months. M1 data – cash and current accounts – is a leading indicator for economy six months to a year ahead.
    A mix of fiscal austerity and monetary tightening by the ECB have tipped Iberian region into a downward spiral.
    Shrinking money supply is dangerous to countries with high debt. Portugal´s total debt is far higher than Greece´s.
    EU tries to claim that Greece alone is a problem.
    The root of the EMU crisis is that Greece, Portugal, Spain and Italy have lost 30% in labour competitiveness against Germany since the mid-1990s.
    Toxic mix of fiscal tightening, higher debt costs and now the recession will tip them over.
    AAA rating of France is in danger.
    Italy has been told to balance its budget by 2013. This risks pushing Italy into a slump that sets off the destructive debt dynamics.
    Italy cannot compete while inside the euro.
    EFSF bailout fund would only concentrate risks for creditors. It guarantees faster contagion to eurozone core.
    Germany has so far vetoed all moves to fiscal union, Eurobonds, debt-pooling or ECB activism.
    EFSF is Germany´s last gamble.
    FUNDAMENTAL ISSUES about the euro remain unanswered. Structural problems remain unsolved.
    Problem with unorderly Greek default is that it would spark a “credit event” with CDS (credit default swaps) payout. This would lead to a new financial crisis.
    When global bond markets stop lending to a number of large Western economies, serious civil unrest will follow. And food shortages.
    Italy recently had to pay 6.06% for 10-year money. 6% is the upper sustainable level.
    Greece was allowed to join the eurozone because of fraud. JP Morgan Chase and Goldman Sachs helped Greece. A loan by Goldman Sachs allowed Greece to join the euro.
    “No” answer in the referendum will mean that the government will fall. There will be no money to pay public sector workers.
    Then Greece must default and leave the euro. Then there will be chaos.
    So, what will happen next?
    Greece, Portugal, Spain and Italy will collapse. Italy, 8th biggest economy in the world, is too big to bail-out. Other European countries will face recession or depression, too.
    The US is in worse shape than the eurozone. The dollar will soon lose its role as the world´s reserve currency. After this the US cannot pay its debt.
    There is a process called PROBLEM-REACTION-SOLUTION.
    Having mostly created the current crisis the globalists will answer the call from public for action by offering their solution.
    The solution will be the United States of Europe meaning fiscal and political union inside Europe.
    The dollar and the euro will be replaced by IMF´s Bancor currency. The first step towards Bancor will be expanded use of IMF´s SDR as the world´s reserve currency.

  • Chris lancashire

    It has been fairly clear for some time that Greece cannot remain in the Euro; far better to devise a method for their orderly exit and a managed default on existing debt. You are correct, the politicians at this summit spent their time papering over cracks and posturing until the predictable 4 00am declaration of success (which wasn’t).

  • Might be an inspired move by Papandreou. As the referendum gets closer and opinion polls show that the proposition will be defeated, then the EU (read Germany / France) may well offer the Greeks a far better deal in order to try to get a “winning” deal.

  • Matthew

    Be careful what you wish for!
    If Greece leaves the Euro and goes back to the Drachma its debts (bonds) will still be Euro denominated so in one fell swoop their debt burden will be increased. This is just basic first year undergrad economics.
    So the consequence of Greece ‘leaving the Euro’ is that they will be insolvent for a generation and trigger a banking crisis that will make the credit crunch look like a kids tea party.
    They have to stay in and reform their economy – there’s no choice.

  • George

    You’re right Chris and if they’d done this 18 months ago they would have saved a lot of pain! The Greeks, Portuguese, Spanish and Italians would be better off out but will they be allowed to leave?

  • Ehtch

    The Euro is stuffed. Might as well all to declare it, and put it down as a bad idea. But a good idea, but not when it was fantasised. Leave it a hundred years or so, and then see how the land lies.

  • David E

    You’re right, that was the key question without an answer, but a referendum is still a nasty shock. Depends a bit on the actual question though. I’d be for “do you want to save our country despite some coming hard times as a consequence or do you want to plunge it into the abyss taking the global economy with it?”

  • MicheleB

    Voter turnout isn’t fabulous  in Greece but I’m taking bets it’ll be a lot higher for this choice :

    Our own turnout in 2010 was a disgrace.

  • Chris lancashire

    Whether or not it’s desirable, Pappandreou’s calling of a referendum has made default and ejection almost inevitable. It has shown there is no political will to push reform through and an unwilling public will prefer devaluation and a return to the drachma to the hard choices involved in staying in the Euro.

  • MicheleB

    I would imagine that if they even think of such an idea the consequences  will be pointed out to them pre-vote.

    Who, ever, would holiday or trade with Greece again if it put up those two fingers?

    I do think though that they deserve some objective media coverage about their recent past. 

    I’ve always been aware of so many southern Europeans’ lack of belief in tax and infrastructure and the inate childishness they share with some Small Govt believers elsewhere (naming no names).  I’ve only very recently become aware of how much was stolen from them by their 20C occupiers.

    We don’t know how well or badly that gold would have been looked after by their recent Govts if there had been the chance.

    I don’t suppose they would have had the humungous post-yump-mid90s debts that ours was used to pay our way out of.

  • Ehtch

    It does seem that Greek politicians are small-mindedly looking after their own behinds with these indefensible manouverings. Mirrors how they let their country cook their own books earlier in the 2000’s.

    Anyway, it is on the cards they will be kicked out of the Euro, and let to rot in their made stew, so says the present news at the moment. They have worn many people’s patience just too thin,

  • Ehtch

    Oh blimey! Iran now, but this sounds of a different dimension when someone mentions the N word. Or is it some sort of new world order double bluff to try and keep us shitting our pants? I hope so.

  • MicheleB

    Sounds odd Ehtch, what with ‘one official’ here and ‘one official’ there and no clarification whether it’s one in total or half a dozen, in which case the MoD would resemble fishnet (or William’s 4-in-a-row).

    Israel has covert nuclear weapons and still receives a few million dollars per year from US, I don’t suppose that makes much of the mid East feel safe.