Why has Papandreou called for a referendum?
I offer this as one possible explanation.
I think the very fact that he has called for a referendum is an exact measure of how sure he is that without one, he will NOT be able to hold the Greek people to the austerity measures which the IMF and the EU is insisting on.
Papandreou is trying to claim from the protesters the democratic high ground. Till now the trump card of the protests has been the quite true claim that the government did not have a mandate for what it was trying to force upon the people. And this argument was killing his government. It meant sooner or later civil disobedience would make the austerity cuts impossible to enforce and his government would fall.
The referendum is the gamble. If he can frighten enough of the middle and working class of Greece in to voting ‘yes’ no matter how slim the majority and how small the turn out on the day, he will be able to claim a mandate and cast himself and his policy as the democratically expressed will of the people. For the first time he would be able to cast the protesters as the undemocratic ones. He would have a freer hand is calling out the police and even the army against them in the name of enforcing, not the ‘will of the troika’ – an impossible thing to defend – but the democratically voted upon will the the majority.
This is what he must achieve. Of course he might lose. But how much worse would he be off than at present? I think he has concluded he cannot force the will of the Troika upon the Greek people for long enough. He cannot hold them to it. So if he holds a referendum and loses he may feel he would be left no worse off. He would have arrived at the same moment of crisis with or without a referendum.
Illustration by Steve Finney
Of course the Troika might see things differently and want there to be some sort of plan B in case the vote goes against.
So might there be a plan B which would be revealed at that point? It is easy to imagine one. In his shoes I would have ready provocateurs mainly drawn from elite police units, whose job it would be to make sure violence and anarchy were seen to break out where the cameras were pointing. Such events would seem to substantiate his own dark warnings of what anarchy Greece would be plunged in to by a ‘no’ vote. And it would then be a matter of having in place people in the army who were of a mind to ‘step’ in to ensure public order ‘for the good of the country’ . It seems ominous that as reported in Athens news the government has replaced ALL the leadership of the armed force in Greece. The Chief of the Greek National Defence General Staff, the head of the Army , the head of the Air Force and the Head of the Navy have all been replaced by people chosen by Papandreou and his inner circle of ministers.
Whether there could be such a plan B or not one thing is certain. The next few weeks will see a propaganda war of epic intensity and scope. For the referendum to deliver a ‘yes’ for the government and the Troika the Greek people have to be frightened into voting ‘yes’. They must be harangued and bullied with a ceaseless barrage for threats of anarchy, social collapse and global, endless pariah status from which there can not be any escape. The Greek people must see this message everywhere they turn. They must see it being repeated not only in their own press but in every country around them. They must be convinced that everybody else, all the rest of Europe and America ‘agrees’ with the nightmare threats.
Thus in the next weeks we will all see a propaganda campaign of shock and awe proportions and intensity.
We are now at war. We have come to it at last. We must fight this war. It is the moment when we MUST get the counter message out loud and clear. If the Greek people feel alone we cannot expect them to stand like the Spartan 300. We must raise our own voices above the din of propaganda so the Greek people can hear us.
In the mean time we can all watch the panic in the markets as they wonder if they can even hold it together for the weeks the referendum will take. The markets are looking at Italy fear that if Berlusconi cannot hold on to power then Italy will tear in two. They look at France and wonder if the big French banks will start to sink and set a fire in France as well.
Neither time nor the truth is on the side of the banks, bond holders and financial class in general. Now is the time to speak truth to power.
The referendum can’t really fail from Pappa G.’s point of view.
If the people vote “yes”, then as you say they will have to “suck it up”, as this is the will of the people.
If the people say “no” and Greece has major funding problems or has to exit the Euro, or suffers major social unrest, then Pappa G. can claim it was because the people chose the wrong answer.
He must surely know that the country is in deep trouble, no matter which move it makes.
The cunning move on his part is in absolving himself from any responsibilty for making the wrong decision. If any outcome was going to be bleak, better to make it look like it was the public that made the bad choice.
David, as usual I think your analysis is spot on. I’m concerned as to the motives behind the replacement of those at the top of the military. From other articles I’ve read a lot of the middle class no longer tune in to the main stream media. I can only hope that via the internet and the Keiser Report, they can get the truth. The states control over the media is not as strong, now that the internet exists.
G.Pap’s option to go for a referendum should not have been a surprise to objective analysis.
What IS a surprise is the Eurocrats’ lack of imagination in contemplating what might happen in response to their fudge and a smoke and mirrors bail-out deal.
The reaction that “-how can he pass the buck to the masses-” has been seen from them just shows how far down the undemocratic line they have gone in Brussels and wherever. Of course we should have known that from the whole Lisbon Treaty nonsense, but it still beggars belief.
Now, what will Ireland do?
The next step must come from them.
So very true. Stakes are getting way higher… and the results are… (o_0)
Golem, I think you’ve put forward the most likely analysis here. The talk is of a referendum in January. Even if the government loses a confidence vote & falls, the subsequent general election will probably be a contest seeking a mandate on the Troika deal, or something ‘other’, anyway.
So, over the next month or two, the EU/ECB have the opportunity, likely with any number of ‘markets’ alarm bells going off, of fundamentally revisiting their failed strategy. Particularly in respect of having the central bank operate, well, as a central bank can/would anywhere else with a fiat, free floating currency, and in the deepest recession since the 1930s.
For Greece to remain in the euro, even in the short term, there has to be an ECB/fiscal operation along the lines of Marshall Auerback’s (MMT inspired) proposal. This at least would offer some real eurozone economic recovery & breathing space to consider a new treaty on a properly functioning curreny union.
If the EU/ECB authorities etc. cannot do this, Greece should default, leave the euro & adopt either an MMT approach (or smilar positivemoney.org) with a new Drachma.
The entire edifice of mainstream political leadership, economics advisers, media etc. seem to me so unbelievably stupid – more than I ever thought possible. Will they ‘cop on’ now after bringing everything to the brink? Who knows? But I agree we must shout louder than ever.
@ profromdover
Official Ireland, & most of the rest will do what they do best & have done throughout the entire bankster fraud crisis – absolutely nothing except grovelling subservience to the EU/ECB ‘masters’. Disgusting, but sadly the truth.
Papandreou is obviously caught between a rock and a hard-place.
In recognition of which he’s resorted to the democratic process as the excuse of last resort.
In effect having hobbled the democratic horse he wants it to charge through the fray and carry him to safety.
Meanwhile the poor horse, still hobbled, is damned if it does or equally damned if it doesn’t and either way will have to met the costs of the hobble.
However one other option could be considered. The Greeks could migrate to France or Germany and just leave a caretaker cadre to look after their homeland.
We (me & several like-minded stubborn Greeks) are not going to migrate. We shall eat dust and barks, should need arise, and we shall stay our ground – which is not necessarily European. We would sacrifice ourselves for what is worth, not for protecting our neighbours’ cozy sleep.
Exploitation and unrest began deep in the South (see, Africa) many decades ago, and they will only continue heading North. We all live on the same planet – one has to face Truth sooner, the other a bit later, that’s all. Tell your grandchildren a Greek said so.
I wouldn’t want to play pool against this guy G-Pap. What a hussle.
Fudge your numbers to get into the Euro. Borrow so much money you threaten to bring the whole thing down. Get as much money from the others via bailouts, then at the very last minute, put the gun to your head and ask for more money or you’ll probably lose a referendum.
Brilliantly played. The Irish government could learn a thing or two about how to negotiate….
There is something very wrong when democracy causes this much trouble. It’s living proof that the politicians work for the banksters.
In many ways the referendum is the nuclear option all the politicians have. If Merkel ever wanted to sink the Greeks (or French for that matter), she could call a referendum in Germany about whether or not there should be bail outs (i think we all know how that would go…)
I get the feeling that she is mad with G-Pap as he has played the trump card. She wanted to keep it until later in the game….
Merkel cannot easily call a referendum because the Federal Law does not provide for referenda.
I’m not sure her party would permit a change to allow them,
Just as Germans are paranoid about hyper-inflation, so they are about national referenda – see Nazi Referendums, of which there were three
It’s interesting how the narrative has developed. What was a massive private banking failure is virtually forgotten, to be replaced with the sovereign debt construct – the rapacity of bankers eclipsed by the venality of politicians – with the banks again calling the shots.
So it’s always worth remembering how we got here. Yes, the Greeks allegedly massaged their public debts with the connivance of Goldman Sachs, the Italian economy has long been suspected to be a bit of a basket case, Ireland always was a tiger on paper only – but there’s a reason why ALL EU COUNTRIES + the UK + the US are in deep sh*t – and it comes down to a belief that markets are self-regulating.
Now, after 40 years of being told that government is the problem, and the dismantling of any meaningful regulatory framework, we have a generation of politicians who don’t believe in government, being urged by a group of bankers who don’t believe in government to intervene just long enough to transfer taxpayers’ future earnings and any public assets that can be monetized into the private sector. And then wonder why it isn’t working.
Given the size of the shadow banking sector, and the ingenuity of creative accountants, is it even possible that the figures we see bandied about in the press have more than a tenuous link with reality? The banking system collapsed because banks no longer knew the value of their own, or anyone else’s ‘assets’. Since then the waters have only become more muddied.
Anyway, the upshot is the Greeks have a choice of remaining a vassal state, or doing an Argentina and it’s hard to see how either are politically viable. And, whatever the decision, the circus simply moves on because the debt taken on by government is not serviceable (which is why it was taken on in the first pace!). The only other option would seem to be a wider scale repudiation of debt, a debt jubilee, a re-set of the world economy – a recognition that ‘Debts that cannot be repaid, won’t be repaid’ (copyright Michael Hudson)
Right on cue…………
Barroso threatening famine & pestilence in Greece……………a civil servent ??
Whatever about heads of state tearing chunks out of each other behind closed doors but a f£$king civil servent ?
The commission – a poltical civil service was always problematic for the Anglo world – but this burst of venom is just too much.
He has crossed the Rubicon.
Its time for Ireland to get out of dodge – I think there is a equal amount of assets /debts split between Britain & Ireland – a Sterling link is the most likely option.
Maybe this irish Bond transfer, NAMA , reduce our money supply thingy was all about creating a acceptable amount of poverty in Ireland before a deal was struck.
maybe………… – Also the Greek PM has deep links with the Anglo establishment – he would not do this unless some money power was riding shotgun.
Martin Wolf in the FT:
Bottom line:
“Do creditors rule the world? Not really. In the short run, they can threaten to turn off the credit. But their surpluses depend on the willingness and ability of others to run deficits. It would be more sensible to admit that there has been too much borrowing by the profligate because there was too much lending by the supposedly prudent. Once it is understood that both are at fault, both must adjust. Imposing one-sided adjustment on erstwhile debtors will not work. As little Greece seems about to prove, debtors are able to inflict a great deal of damage on everybody – as the US discovered in the Great Depression. It would be a good idea to rediscover that reciprocal interest urgently, right now.
http://goo.gl/hf3ZX
I agree one explanation for the referendum is to outmaneuver the opposition and secure a mandate, but I am not sure the Greek government are betting everything on it succeeding. I am not sure it will sink the government if it fails. I wonder if they expect it to. He could be calling for a referendum to strengthen his hand in the deal. If it fails, he goes back and demands a better bargain, which will further test the resolve of the Euro peeps.
Greece will never get a better deal than they will now, but Papandreou needs more than hand-wringing to secure it. He needs to show that the Greek people rejected it.
Golem thank you. Two blogs that may be of interest on Greek situation
http://www.keeptalkinggreece.com/2011/11/02/why-merkel-sarkozy-pretend-to-be-surprised-by-greek-referendum/
http://yanisvaroufakis.eu/2011/11/02/time-to-resign-mr-papandreou/#more-1261
Hi Golem
Great to have you back. I am praying that Greece votes no which will be the end of globalisation, just as the Gold Standard ended. Nothing is unthinkable now. The once bankrupt Argentina is now having to defend itself against hot money inflows, whodda thunk that?
The first countries out of the Gold Standard recovered fastest, the same will be true of globalisation. Embrace the change it’s coming fast. It won’t be pretty but life will go on.
Sure. That is the standard and practical political explanation. Except he is supposed to have negotiated in good faith with the bailout ‘white knights’!
I offered another one: the chance to make money by moving the markets. It is not insider trading if a Greek does it?
Dork raises another interesting point: the American and European interests are divergent. Pap is more closely aligned with America who will have foreseen or triggered the very scenario now playing out. Damaging the Eurozone weakens a competitor and also enables a business model! This crisis is a splendid opportunity to teach basic finance to Europeans who should have been forewarned by what we all saw on 9/11.
This is not a sporadic collapse, it is well known who are weakest and I do believe Greek finances were familiar to GS?
Wise up, guys?
Cyclical crises are predictable…. did I leave out any islands?
@Patrick. Nonsense. The last thing America needs is a crippled Europe. They understand that growth is the only way out because it will buy time to write off the bad debts. The reason Geithner supported making an example of Ireland was so that the bigger Euro countries would see what was in store for them if they didn’t play ball. Greece is being forced to swallow similar medicine. The difference between Greece and Ireland is that at least Papandreou has the balls to push for a better deal by calling for a referendum. He isn’t going to get it any other way.
@theprofromdover Ha ha ha ha Next step from the Irish? Are you kidding? We’ll go back to tipping our hats and saying ‘Yes, Sor’ at every opportunity. We will leave the Greeks do the dirty work and hope to get crumbs from the broken pie on the Franco-German table. If we go postal at all it will be as individuals. The only thing we can organise is a wake.
“He is expected to offer a coalition government, with former Greek central banker Lucas Papademos at the helm.” http://www.bbc.co.uk/news/world-15575198
Right. I can see that being popular with the masses. And will they try to reverse the referendum decision? That would go down like a lead balloon.
Underlying the issue of the Greek debt crisis lurks the vexed question of Credit Default Swaps. Used as a hedge they make perfect sense, but have mutated into an unregulated free-for-all for speculators. Armed with a batch of CDS traders can short Greek/Italian/Portuguese/Spanish/French/UK debt (delete as applicable) in a one-way bet. Or so it seemed. But what happens when a default detonates Warren Buffet’s ‘financial WMDs’?:
”If Greece goes ahead with the referendum, its citizenry would most probably reject the plan, creating a wave of instability in the region. In response, the EU would probably cut its lifeline to Greece, forcing the nation to default on its debt. That would cause all of the major Greek banks to collapse, as they are the largest holders of Greek debt. But at the same time, it would cause several European banks to take billions of euros in write downs, as they too hold significant amounts of Greek debt.
It doesn’t end there. Since the Greeks were forced into default, credit default swap contracts on Greek debt would be triggered. That means the banks and hedge funds that were short Greek debt would now be owed billions of euros in insurance payments by those that were long Greek debt. It is widely believed that the large banks, which issue and sometime hold on to all those CDS contracts, have not set aside enough capital to payout claims. This could lead to an AIG-style meltdown of many financial institutions. That explains why bank stocks around the globe fell hard yesterday, especially those that play big in the CDS market like Bank of America and JP Morgan Chase in the U.S., which were both down around 6%, as well as those in Europe like Societe Generale, which was down over 16%.
This CDS chain reaction is one of the major reasons why the Europeans have kept Greece on life support for so long. The total collapse of the Greek economy would be a sad event, but a confidence crisis in the word banking system, three years after the fall of Lehman Brothers, would be a catastrophe. One of the major planks of the latest fix-it plan was to get the banks and other major holders of Greek debt to agree to take a 50% haircut on their bonds. Since such a cut would be voluntary “soft default,” it would not trigger the CDS contracts, therefore limiting the fallout to those banks that physically held Greek debt.
…
The banks have balked at taking a larger haircut, but the threat of a hard default may scare them into accepting a greater loss.”
http://goo.gl/S99Iv
Devices sold ostensibly to dilute risk have effectively chained all the major players together – with each default threatening to pull the rest over the edge.
Charles -couldn’t we just headline it as -World Ponzi Scheme in Intensive Care – Treatment Costs Threaten Humanity.
Wall Street spokesman declares; “We must save funny money in order for the world to exist.”
Michael Lewis opens Boomerang with an account of a meeting he had with a hedge fund manager who was buying up Greek debt CDS at the end of 2008 from firms like Goldman*, JPM and Morgan Stanley – all institutions he assumed Too Big To Fail, and therefore tacitly underwritten by the US government. At that time he could purchase CDS on $1 million of Greek bonds for 0.11% – i.e. $1,100 pa.. He assumed a70% payout in the event of default, which would net $700,000 for every $1,100 invested/bet. It’s not hard to see why a Greek default would start to look very attractive.
It makes perfect sense for you to insure your house against fire, but if you were to find that a lot of other people had taken out fire insurance on your house, you might get a bit concerned. And that’s the flaw at the heart of the CDS market, it’s created perverse incentives for failure. And while fire insurance companies are required to hold capital to cover payouts, CDS issuers like AIG weren’t under the same obligation. So if a lot of big financial institutions have been handing out default insurance on sovereign debt on the assumption that they would be unlikely to have to make a payout . . .
*It’s alleged that Goldman Sachs helped the Greek government massage its debt figures to smooth entry into the Euro, so it would be ironic if they were to be hoist by their own petard.
N.B.:
“So, what does this mean? Well, it should be assumed that Goldman is well hedged for its exposure, at least on academic basis. The problem is its academic. AIG has taught as that bilateral netting is tantamount to bullshit at this level without government bailout intervention. If there is any entity at risk of counterparty default or who is at the behest of a government bailout if the proverbial feces hits the fan blades… Ladies and gentlemen, that entity would be known as Goldman Sachs.
http://goo.gl/N5iht
Very good synopsis John!