The Greek referendum: the beginning of the end or just the end?

When the Greek PM George Papandreou announced that Greece would hold a referendum to decide whether or not to hand over its economic sovereignty to (principally) Germany and France, you can only imagine what the reaction would have been in Paris and Berlin (assuming of course they weren’t aware of Papandreou’s plans).

All the hard work of the most recent summit undone in less than three working days. Presumably Papandreou either feels confident that Greeks want to remain in the EU and keep the euro (which is presumably how the referendum question will be structured) or else he simply cannot bring it upon himself to cede away Greece’s economic sovereignty for the best part of the next 20 years. It’s possible too that he sees the referendum as a means to ending the violence and rioting by those protesting against the austerity measures demanded by the euro-zone leaders. Public tolerance and support for the demonstrations will fall away quickly if the country backs Papandreou’s decisions through the referendum.

For a particularly interesting view of the Greek and general euro situation, read Ambrose Evans-Pritchard’s recent column from The Telegraph.

Europe’s inspectors will henceforth establish an occupation office in Athens to ensure the “full implementation” of austerity policies, for as long as it takes. Greece has been stripped even of the pretence of sovereignty.

Stirring up some not-too distant feelings no doubt, but he makes a valid point in that Greece cannot repair itself without devaluing its currency (or unless Germany and France effectively write Greece a blank cheque, which isn’t going to happen). And the same applies to Portugal, Spain and Italy. Their only salvation lies in currency devaluation, which is not going to happen while they remain part of the euro.

Perhaps Papandreou has thought it through and has had enough. Perhaps he doesn’t want to be remembered as the man who surrendered Greece’s economic sovereignty (all of us, particularly politicians, give some thought to the legacy we leave behind) and reckons Greece’s interests in the long run would be best served by leaving the euro, accepting the short term pain and looking ahead to a restructured economy in ten years time? Perhaps a hard default and a severe but shorter recession is better than this death by a thousand cuts?

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