Just when European leaders were patting themselves on the back after last week’s rescue plan for Greece and the euro, the eurozone was plunged back into turmoil after Greek Prime Minister George Papandreou’s shock announcement of a popular referendum on the bailout, which he then abandoned.
Greece needs stability and national unity, not elections, at this crucial moment inits history- Anthony Manduca
Papandreou said he had changed his mind on the idea of a referendum after the Conservative opposition promised to support the rescue package; however, the uncertainty remained, especially as the Socialist Prime Minister called for a vote of confidence in his government, which he could lose, and the damage had certainly been done.
Papandreou’s referendum surprise sent the markets plummeting, caused friction with his European partners, created a political crisis in Greece, brought about a party revolt among his governing Socialists, led German Chancellor Angela Merkel and French President Nicolas Sarkozy to state that Greece’s exit from the eurozone was indeed possible, and overshadowed the G20 summit in Cannes where the EU had hoped to show the world that the eurozone crisis had been successfully tackled.
The EU was particularly furious about the referendum announcement and European Commission President Jose Manuel Barroso told Papandreou that Brussels would withhold an overdue tranche of €8 billion in aid to Greece due to the new uncertainly created by Athens.
The feeling among EU leaders was that once Greece had agreed to the rescue plan it was irresponsible to announce a few days later – without consulting anyone – that this agreement couldn’t be implemented unless it was approved in a referendum.
Both Merkel and Sarkozy emphasised this point to Papandreou at a meeting in Cannes prior to the G20, making it clear that Greece had to decide once and for all whether it wanted to remain in the eurozone.
There is no doubt at all that Papandreou committed a monumental blunder when he announced that a referendum was to be held – he put narrow political considerations ahead of the eurozone’s stability at a very critical time for the single currency – and he was not only criticised by the opposition and a number of his own MPs, but also by some of his fellow Cabinet members, some of whom, like Finance Minister Evangelos Venizelos, were kept in the dark about his plans.
One can argue that Papandreou’s referendum ‘ploy’ succeeded in getting the opposition to support the bailout plan and thus prevented the Conservatives from taking political advantage of the severe austerity measures that Greece has to implement.
As Edward Scicluna, a Labour MEP and vice-chairman of the European Parliament’s Committee for Economic and Monetary Affairs told me: “He (Papandreou) does not want to go the Portuguese, Irish and soon Spanish way where the opposition party use these protests to gain power while the austerity programmes stay as they were before.”
Antonis Samaras, the leader of the opposition New Democracy, however, denied that he had previously not supported the rescue plan. On Thursday evening, after leading his MPs in a walkout of Parliament and calling for snap elections, he said angrily: “I am wondering; Mr Papandreou almost destroyed Greece and Europe, the euro, the international stock markets, his own party in order to ensure what? So that he could blackmail me and the Greek public? Or to ensure what I had already said several days ago, that I accept the bailout agreement as unavoidable?”
Papandreou’s gamble certainly backfired, and besides creating more turmoil for the eurozone it divided his own party and threatened his survival as Prime Minister. Papandreou performed a U-turn on his referendum pledge because of pressure both within the EU and his Socialist Pasok party, and his two-seat majority in Parliament is looking more and more fragile.
The Prime Minster also sent out conflicting signals about his own future, first offering to step down as Prime Minister to pave the way for a national unity government with the opposition, and then reversing his offer. Such backtracking was not appreciated by the younger modernising wing of the Socialist party, which according to some reports is making plans for a change in leadership.
The vote of confidence was expected to be taken in the early hours yesterday morning and one Socialist MP had already made it clear that she would probably vote against her government, which means Papandreou’s majority would be reduced to one.
If any other government MP votes against Papandreou the government would collapse and early elections held, which means more uncertainty, something Greece can ill-afford.
Even if Papandreou does survive the vote, his days are almost certainly numbered. If certain media reports are to be believed, Papandreou will agree to stand down as Prime Minister in return for a vote of confidence, and to allow his party to join a coalition government with the Conservative New Democracy opposition.
This is definitely the best option for Greece, which needs a government of national unity, hopefully including technocrats, to steer the country through these very challenging times and to oversee real, genuine economic reform.
I hope the Greek Prime Minister survives the confidence vote and that this is followed by a new coalition government headed by a new Prime Minister – both the opposition as well as dissident Socialist MPs would demand Papandreou’s resignation as the price to pay for such a coalition.
Greece needs stability and national unity, not elections, at this crucial moment in its history.
(The column was submitted on Friday, before the vote)