They may have invented democracy but it’s causing a headache for everyone else. Greek Prime Minister’s George Papandreou vow to take the latest Eurozone debt plan to a referendum has thrown other European leaders and its markets into a panic.
“Citizens are the source of our strength and citizens will be called on to say ‘yes’ or ‘no’ to the agreement. It is not for others to decide but the Greek people to decide … we have faith in the people. We believe in democratic participation. We are not afraid of it,” declared Papandreou as he announced the referendum
“The people will be asked whether they want to adopt [the deal] or reject [the deal]. This vote of confidence will be a foundation stone on which we will build a new structure, a new Greece.”
On Friday the Greek parliament will have a vote of confidence for the leadership of Papandreou. The debt deal referendum will not occur until probably January.
A referendum throws into doubt negotiations that took months to finalise with Eurozone leaders. It’s not exactly surprising that the “home of democracy” would want to vote on the austerity measures. But democracy doesn’t mean you always like the outcome, says The Economist‘s Buttonwood notebook blog:
“If the Greeks designed their own menu, one would guess that it would be for the EU to lend them money, without imposing the austerity conditions. But the Germans have to satisfy their own voters; democracy cuts both ways.”
Giving Greeks the chance to vote helps make them accountable, notes Elena Becatoros in The Independent.
“The public vote would allow the Socialists — who have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over austerity measures — to pass the responsibility for the country’s fate onto the Greek people themselves.”
Why would the Greeks reject the EU plan? The Independent‘s Ben Chu offers a look at the details:
- Public sector wages have been cut by 15%. An additional 20% cut is in the pipeline.
- Wages of employees of state-owned enterprises have been cut by 30%. A further 20% cut is due in 2011-12.
- Pensions in the public and private sector have been cut by 10%. An additional 4% reduction is coming.
- 70% of public sector contract employees, around 85,000, have been made redundant.
- Total public sector employment has been cut by 10%.”
- Spending on pensions, illness and drugs has been reduced by EUR3.4bn, 1.5% of GDP.
Can Papandreou maintain his leadership? Things are looking shaky, writes George Gilson in Athens News, a Greek newspaper in English.
“At the same time, Papandreou’s sudden decision to replace the chairman of the joint chiefs of staff and the heads of all three branches of the military the day after the referendum announcement stirred another political uproar. Coming amidst a raging political crisis, the move was viewed as yet another sign of political panic and further undermined confidence in the government.”
The Eurozone deal had placated markets last week. This latest news isn’t helping, David Miller, a partner at Cheviot Asset Management, tells The Guardian:
“Papandreou’s strategy could well be to smoke out the opposition by winning the confidence vote on Friday, and then try and gain approval for the austerity plan by presenting it as the best of the two unpalatable options.
That said, at this time subtlety isn’t going to reassure the markets. Today’s market reaction was a clear sign that a disorderly Greek default has not been priced in and that the good will generated by last weeks announcement has evaporated.”
Amber:
Now this is an interesting sentence:
“They may have invented democracy but they don’t quite seem to be in control of it.”
Are we saying here that democracy is OK if the people’s choices are limited to what is acceptable to banks and the markets? Or that they shouldn’t be consulted unless we’ll “all” like the outcome?
The Greek state is in deep crisis and the formulaic contractionary “cure” prescribed by the EU, and the IMF are a recipe for social and economic disaster… as they have proven elsewhere.
In the short term there is little alternative – a default, or a partial “haircut” in which the lenders write off a decent percentage of the debt and wear the loss, or a continued program of austerity which increases poverty, unemployment and reduces economic activity. I’d be going the default route myself and let the banks wear it. Didn’t do Argentina any harm – in fact far from it.
But longer term Greece has an even deeper problem – that is, with the black economy running at an estimated 39% of GDP, the benefits of economic growth and activity do not flow to the state, they trickle. They are pinched. Pocket privatisations all over the country.
So, even if the IMF/EU moralising strategy of grinding the economy into the dirt to resuscitate it actually works, it is unlikely that the state will derive sufficient benefit to resolve the debt issue.
Without a decent tax system – unless the lawyers, doctors, hoteliers and cab drivers start paying tax – then the Greek state will continue to bleed to death.
The question on the table is the actual future of the Greek state and the sort of society it is and can become. This is too big a question for a government and should rightly be decided by the people.
Hopefully that will be one of the options on Papandreou’s referendum… Κάνετε τους πλουσίους να πληρώσουν … make the rich pay!
Why is Papandreou not in control of democracy ?- leaving this bailout to a referendum is democracy in action. Pushing this appalling bailout through without public support is, frankly, antidemocratic. There is virtually blood on the streets.
The public should be able to vote down the bailout with its appalling austerity measures – given that these are going to be inflicted precisely on a class of individuals, yes, wage/salary earners who have paid taxes and are not responsible for the debt crisis. Why should they suffer? What about the banks and those businesses who didn’t pay their tax and caused the debt in Greece – under this bailout plan, they will be getting out of this with a minimum of damage, which is frankly disgusting.
How about the plan that the banks and the bold holders take the hair cut? They can afford it. The markets may not like it but they are governed by greedy big business who frankly can be given the right royal finger on this one.
Iceland refused to bail out the banks (unlike poor Greece and others), much to the chagrin of banks like Lloyds of London and the markets and look where it is now – its in a much better space than the PIGS states who stupidly did.
Stupid decision by the Geeks (sic). It will be voted down and then what?
@Peter Ormonde and @Karen
Thanks for pointing that out, I have actually adjusted that first line now to read “They may have invented democracy but it’s causing a headache for everyone else”. The line had been adjusted in subbing and it was my fault in not picking up that it was confusing. Thanks.
Paul Keating has been on The Conversation Hour with Richard Fidler which is avilable for podcast.
He reminded us he thought the EU should just have been France, Germany and the Scandinavian countries.
He went on explaing how the single currency means the only solution available to countries like Greece is nowdevaluation of assets. That is lower wages, lower real estate values etc etc.
I recommend a listen as always Pul Keating is fascinating.