COMMENT: No doubt, the PM's calling for a referendum is to solidify himself politically, yet Greece's refusal to adopt the EU/IMF-mandated austerity measures could result in a financial collapse of the government (it has only enough money to get through the first two weeks of November) and expulsion from the EU's monetary system.
The leaders of France and Germany scrambled to limit the damage to the wider euro zone, and European politicians expressed incredulity at an announcement that caught everyone by surprise -- including Papandreou's own finance minister, Evangelos Venizelos. Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, refused to rule out a Greek debt default. One senior German parliamentarian suggested the euro zone might cast Athens adrift, cutting off its aid lifeline and allowing the nation to default on its huge debts.The renewed uncertainty in Greece is likely to be an embarrassment for G20 leaders meeting in France this week trying to coax China into throwing the euro zone a financial lifeline.
Venizelos was taken to a hospital Tuesday morning, complaining of stomach pain. Doctors said he had an inflamed appendix. He is the latest in a string of governing party officials to be rushed to hospitals in recent weeks. One Greek negotiator had a heart attack in Brussels last week.
If Papandreou’s government does, it would not be the first one in Europe to be toppled by the austerity demanded by EU debt relief. In Ireland and Portugal governments that accepted bailouts from the European Union and the International Monetary Fund fell, and last month the Slovakian government collapsed over whether to participate in the EU's rescue package.
While Greece's self-inflicted wound renders all stock exchanges jumpy, time is quickly running out for Papandreou. The real question is: Can Greece fiscally survive until a January referendum? The other is: If the EU/IMF provide Greece a bridge bailout without accepting mandated austerity measures, such funds will only carry Greece through until January.
Hence, if the referendum is conducted in January and angry Greeks vote against the bailout, the EU will have expended precious funds for naught. It seems logical for the EU to force the bailout NOW on acceptance of the mandated austerity measures or expel Greece from the EU.
Does it make sense for Greece to put the euro in terminal jeopardy and cause everyone else to go down with the ship? I say no.