Followers of this blog know that I have long been skeptical of Europe’s ability to find a solution to its financial problems. The obstacles are huge — a lack of growth (the latest data suggests a slowdown, perhaps even recession, across ALL of Europe’s economies), a Greek debt that is overwhelming and unpayable, and now center-stage, no democratic mechanism for people to vote on EU measures that will affect them.
Prime Minister Papandreou did what he had to — he could not impose a French/German dictated austerity plan on the Greek people without their consent and expect the Greeks to comply with it. So he is calling for a referendum to make people choose: either keep the Euro and comply with the EU imposed austerity conditions, or leave the Euro and take your chances with a return to a Greek currency. At the least, this will restore a semblance of democracy to the process, and ensure that whatever the outcome is for Greece, the Greek people can own it as their own choice, rather than a machination of distant and unaccountable EU leaders.
Unfortunately, the PM did this in the worst possible way — without warning either his European fiscal partners or his own cabinet and party in Greece! So the reaction has been shock and awe, and calls for his resignation.
We now must wait to see how this plays out — will there be a referendum or not? Will Papandreou survive or not? How many weeks before we know what will happen, if an election needs to be called? Democracy is messy, but that is how it works. Better this an an undemocratic imposition of an unworkable outcome, which would discredit democracy as well as the EU.