The Greek Referendum: A Machiavellian Scenario
European politicians and commentators are predictably screaming blue murder over Prime Minister George Papandreou’s announcement that the Greek government will put the EU rescue package to a referendum, but I smell a rat. This looks like a cunning ploy, jointly engineered by Athens and Berlin, to get a more radical “haircut” than the 50 percent announced last Thursday in Brussels … with the French banks footing most of the bill. In this scenario the referendum could be called off (or else the Greek voters induced to say “yes” to the improved deal), and Germany would end up increasing her overall financial and political clout.
On the domestic front Papandreou’s gamble makes sense. “Papandreou’s call for a referendum was a last resort,” according to The New York Times “meant to gain broader political support for the unpopular austerity measures… without forcing early elections.” In fact it is more than that. The center-right opposition has withheld support from the austerity plan forced upon Papandreou by Brussels, but it has no alternative strategy of its own. He does not want to be the sole villain of the piece, and the debate preceding the referendum would force his opponents to declare what would they do differently. Judging by the change of government in Lisbon earlier this year, after the Portuguese government lost the austerity vote, the answer is—nothing much. Papandreou does not want a repeat performance in Athens, and his decision presents the New_Democracy with a dilemma. As The Economist blog points out, “The hope is that the opposition, recognising that there is little choice but to implement agreed upon policies and understanding that the public is likely to reject the deal, will be forced to support the government's austerity measures, thereby making the referendum unnecessary.”
On the more important foreign front, prima facie, it is those wily, Levantine Greeks—at their worst again—wrongfooting “Europe.” To make matters worse, they are doing so a mere three days before the G20 summit, which was supposed to garner foreign support (read: Chinese, possibly Japanese) for resolving the Eurozone debt crisis. For as long as the Greek outcome remains uncertain, no foreign government is going to give Europe the money for the enhanced bailout fund.
“The referendum … is probably the final bell before Greece defaults and quits the euro,” The Guardian was quick to conclude. “The repercussions would be incalculable, for Greece but also for Europe.” The announcement came “out of the blue, it’s surprising, very risky,” says Norbert Barthle, the ranking member of Chancellor Angela Merkel’s Christian Democratic Union. French President Nicolas Sarkozy is “dismayed” by the Greek plan, according to Le Monde.
While the French have every reason to be unpleasantly surprised, the Germans may protest too much. Were they really surprised? Call me paranoid, but on the basis of platitudinous official statements, we still cannot decipher what was on the agenda five weeks ago during the visit to Berlin by Papandreou and his finance minister Evangelos Venizelos. Had it been to simply reassure the markets that they were willing to accept a comprehensive solution to the debt crisis, they could have issued a couple of press releases from their Athens cabinets. On the other hand, working out a subtle, mutually beneficial scenario with Frau Merkel would have required a discrete tete-à-tete encounter.
Let us speculate. On current form there is no doubt that the Greeks would vote “no” in the referendum—possibly by a two-thirds majority. As the date of the vote draws near (probably in late December or early January), the bankers—mainly French bankers holding Greek bonds, that is—will start sweating. Suddenly even the 50 percent “haircut” agreed on October 26 would look good in comparison to Greece’s sovereign default—the nightmare scenario that would follow a “no” vote like night follows day. A last-minute suggestion from Berlin to raise the “haircut” to 65 or 70 percent would still seem preferable to the prospect of getting nothing at all.
I’d say it is an even bet that the Parisians would go for it, thus further reducing Greece’s debt burden at no cost to the German exchequer and at bearable cost to the modestly exposed German banks. Sarkozy would have no choice but to recapitalize Societe Generale and others, thus jeopardizing France’s credit rating and making himself ever more vulnerable to various future diktats from across the Rhine. Papandreou calls the referendum off or else presents himself as a heroic David getting the best deal possible, hence winning the vote.
The writing is already on the wall. French banks exposed to Greek bonds slumped within hours of the referendum: Societe Generale tumbled 13 percent and BNP Paribas and Credit Agricole fell more than 10 percent. By noon Tuesday, the European bank index was down over six percent, wiping out the gains that followed the announcement of the EU rescue deal on October 26. European stocks sank to their lowest level in five weeks. (Washington may have been as surprised by Papandreou’s announcement as Paris, but has no reason to complain: Treasuries rose on the news from Athens, extending the biggest rally in 30-year bonds since March 2009.)
We could not predict the referendum, but the weakness of the rescue package has been evident all along. The euphoria just before the weekend was short-lived. Had I had a few million handy last Thursday and Friday I would have gambled on the put options, as the markets on both sides of the Atlantic swung up in response to the EU package. In reality it was not much of a “deal” to start with, and now it is in disarray.
Papandreou’s “bombshell” announcement appears to make little sense. His government is in jeopardy, his personal credibility with his EU colleagues is collapsing, and his chance of getting a “yes” vote is nil. And yet he is a shrewd politician, the heir to Greece’s foremost political dynasty. Why would he do it? There is more than meets the eye here. What we need to ask is Cui bono?
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I agree with Trifkovic's prediction. Nothing of such a big scale that would eventually change the "given course" by the EU masters would be allowed to happen. There is no short list of means [ even bombing of Greece ,as they did to Serbia in 90's] that the EU heads would use to prevent Greece to say "NO" to the EU rescue package and stick to it. Yet, it was nice to hear, even for a moment, a rebellious voice coming from Greece.
"As the date of the vote draws near (probably in late December or early January), the bankers—mainly French bankers holding Greek bonds, that is—will start sweating."
There are two other considerations which should be noted. Not all the French banks are holding the same or similar amount of Greek debt and those most at risk have already "managed their risk" by moving their capital into those banks that will be left standing after the collapse. Loose dogs can run these international critters night and day but it is very difficult to tree them.
This is why when " European stocks sank to their lowest level in five weeks" American stocks will follow. It may be correct today to still speak to a limted degree about different cultures "where nations are still united by a common faith, morality, history, heroes, holidays, holy days, language and literature." But in matters of Global finance, all hogs feed at the same trough. So when one is starving, you can bet there are more than a few growing hungry. It is just real hard to feed a pen full of hogs one at a time. This understanding is called "Papandreou’s gamble!" in the world of globalism.
The only thing at stake in this is Germany's childish fantasy of playing dictator over a dysfunctional family and the French UMPS dream of a "united Europe" keeping Germany in check. It is becoming increasingly obvious here in France that the EU will not restrain but empower Germany in the short term and that Germany will find itself the ruler over a situation that, frankly, no one understands why one would want to rule.
Yet, it was nice to hear, even for a moment, a rebellious voice coming from Greece.
Rebelling? Please. The Greeks got themselves into this. And yes, the rest of Europe enabled them, but the Panhellenic Socialists and their cronies have acted in nothing but bad faith vis-à-vis the rest of Europe and, to boot, clearly contrarily to the interests of its people. They are just as bad as any other Eurocrat traitor trash.
Re: "...The Greeks got themselves into this..."
Yes, let's blame Greeks for incompetence and greed of decision-makers, banksters and powerful globalists !!!
How do you explain even worse economic situation in Italy, Spain, Portugal....the USA....?
By the way the Greece's president, George Papandreou, is born in the US from Greek father and American mother. He doesn't speak well Greek. Greeks say that his mother is a well educated American from
Jewish Ukrainian descent. But George is very American oriented. Some people say in Greece: The US doesn't need an ambassador in Greece because Papandreou is their best ambassador!
Yes, let’s blame Greeks for incompetence and greed of decision-makers, banksters and powerful globalists !!!
By "Greeks" I didn't necessarily mean the Greek populace (although admittedly the ones who regularly support the PASOK I have little love for) but rather their decision-makers. And they most certainly deserve the blame for not only violating their obligations under treaty but also lying about the size of their deficit.
Not that I'm exonerating the decision-makers elsewhere, either. It is a reflection of just how deeply in bed they all are with one another that none of Greece's contemporaries have made any serious attempt to force the Greek government to hold itself accountable for what it has done (i.e., through expulsion from the Eurozone international club), and a reflection of just how treacherous the international ruling classes are that Papandreou could engage in this kind of political posturing without seriously thinking of leaving the Eurozone.
Of course, leaving the euro would actually be the least painful solution for the Greek populace, but it would be a disaster for a number of banks' bottom lines. Boo-hoo.
My point was that this was purely treacherous posturing on the part of the apparatus that played a willing role in getting his country and the rest of Europe into this mess and not at all an act of revolt against the system. Still, I suppose your rejoicing may not be totally off-base, if this move accelerates the inevitable forced fission of the Eurozone into more manageable monetary spheres.
By the way the Greece’s president, George Papandreou, is born in the US from Greek father and American mother. He doesn’t speak well Greek. Greeks say that his mother is a well educated American from
Jewish Ukrainian descent. But George is very American oriented. Some people say in Greece: The US doesn’t need an ambassador in Greece because Papandreou is their best ambassador!
Oh, I am aware of that. The PASOK constituents are well aware of that, too, and yet they keep electing him! That makes them all the bigger mugs in my opinion.
(Not saying France is really better. Look at the choices we've got.)
I'd say more about what I think of the Papandreou dynasty and what they and their ilk have done to Greece, but I'd rather not expose myself just here and now yet. (Not to mention I don't think Dr.s Trifkovic or Fleming would really appreciate my choice of words.)
But again, as I hinted above, even a broken clock is right twice a day.
Just came across this little gem:
"The referendum…in essence is about nothing else but the question, does Greece want to say in the eurozone, yes or no?" said Merkel at a press conference.
Maybe Boba is even more correct in his sentiments than I thought. My goodness, let's hope the answer is no. Privately, Merkel has to know that would be, in the long run, the best thing for everyone and everything in this mess.
"Privately, Merkel has to know that would be, in the long run, the best thing for everyone and everything in this mess."
Yes, she knows the German exposure to Greek debt is equal to that of the French. The fighting and back stabbing, what is called political maneuvering, is about who gets paid and how, when the real bleeding begins.
Well, not exactly. France's total lending exposure to Greek debt is €56.7 billion, with government exposure of €15 billion. Germany, on the other hand, has a total lending exposure of €34 billion and government exposure of €22.7 billion.
Admittedly, that is a little like asking which party in the car wreck drove the biggest of the flashy fragile automobiles. In the end, we all got wrecked. Of course the gist of your analysis is exactly correct. No one who took a risk on an unreliable state (the Hellenic Republic) has yet been held accountable for doing so or likely will be for at least several years to come.