Greek PM drops trousers

Or rather, drops euro referendum plan1 but the effect is much the same.

When the referendum was announced a few days ago, some thought he had played a blindingly good political hand. Which just goes to show that economists aren't so great at politics and the cobbler should stick to his last. Which is why I'm commenting, obviously. But the argument - that he had magically got out of a difficult position (the Greek public didn't like the deal that was struck, this was he evaded responsibility, and maybe the need to buy off the public might result in a better deal) sounded quite plausible to me. The downsides were that the rest of Europe wasn't going to like it, and also that while it might have been good politics it wasn't clearly good economics.

And that seems to be what the Greek political class has decided:

George Papandreou opened emergency talks with his opponents, who performed a U-turn and agreed to broad austerity measures in exchange for a European bailout.

Faced with the deal falling apart the opposition seem to have been forced to abandon their opposition and agree that yes, they really think the deal is the best solution after all. Which at this point looks good: politicians forced to abandon posturing and consider the good of their country for fear of what their ignorant public might decide if left to themselves.


1. That link is broken, viewed from the perspective of 2015. I think it was

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So much for democracy. The Greeks will do as they are told to do.

Flip side is that if you as a vote have been denied a say in the debts, then you aren't responsible for them. If you're not responsible for them, then its legitimate to not pay and play the game.

If you think that's wrong, send me your credit card details so I can go on a spending spree. I'm sure you will enjoy paying off the debts.

[We, and the Greeks, have a representative democracy. You can argue that govt-by-referendum might be better, but it isn't the standard way, and all the Greeks who voted in the last election voted on that basis, so it is a bit late to complain now.

The problem (and you'll find this hashed out in great detail elsewhere) is that politicians tend to call referendums not because they want the people to have a say, but to get them out of a hole. That was certainly the case in the Greek case: this was no enlightened discovery that Direct Democracy was a good idea; it was a cynical political ploy -W]

Well, it got Pop out of the whole if he survives the no confidence vote.

Since it was the opposition who dug the hole in the first place with crooked accounting this is amusing.

[Yes, and ironically it might do some good by forcing the opposition to come on board. Maybe that was the plan all along? But I doubt that, because he looks too rattled -W]

Re "looks good: politicians forced to abandon posturing and consider the good of their country for fear of what their ignorant public might decide if left to themselves."

But are Greek political class likely to accept that this was a good outcome and therefore the announcement of referendum was sensible and therefore there is no need to change PM?

I wonder about the outcome of a referendum asking whether they want this deal with the austerity measures it involves or worse austerity inposed immediately because the country cannot borrow money and therefore needs to balance its budget immediately.

Would there be any sense of realising that there is no easy way out of the situation and strikes and riots only make it harder to get back on a sustainable path?

[There would be a lot of sense in it. But presumably going on strike is more fun. The party will wear off eventually, I presume, or the entire country really will collapse -W]

William is correct that it was a political ploy. The Greeks of course, aren't happy about it. But the idea that these bailouts are any better for Greece than default is looking at it wrong. The Greeks are screwed either way for a long time, the bailouts just kick the can down the road in hopes of saving Italy from its erratic bond yields which teeter on the edge of sustainability every time anyone from Greece starts a rumor. The rules that Greece must agree to in order to receive the bailout guarantee years on no-growth, weak to no demand, and an eventual selling off of all it's national assets to make up for the "haircut" the banks are taking. The choice the Greeks are making is between sucking it up on their own post euro or sucking it up from foreign banking powers. Temporarily great for Europe and UK and the US, not so much for Greece.

In the US, a country with income, deficit and balance of payment problems, one political party has announced that it will block any and all legislation proposed by the other party until they are given power. Will they need a crisis scare like Greece to return to a working government?

By John McManus (not verified) on 04 Nov 2011 #permalink

Papandreou will likely have ended his political career, as the price of a national unity government will be that he is not the new PM. Meanwhile the Italian=German bond spread and the cost to Italy of rolling over its maturing debt makes Greece look like an easy problem to solve. And in the meantime, the beginnings of any meaningful climate change solutions will have to wait.

By David Graves (not verified) on 04 Nov 2011 #permalink