October 31, 2011
Greek Prime Minister George Papandreou on Monday called an unexpected referendum on a new EU bailout deal for his debt-ridden country, a move that could prompt snap elections if a public angry with austerity rejects the terms.
Pressured by his own lawmakers to share the heavy political burden of belt-tightening with other parties, Papandreou said he needed wider political support for the fiscal measures and structural reforms required by international lenders.
"We trust citizens, we believe in their judgment, we believe in their decision," he told ruling socialist party deputies. "In a few weeks, the (EU) agreement will be a new loan contract ... we must spell out if we are accepting it or if we are rejecting it."
The news unleashed a storm of reaction from opposition parties, which accused Papandreou of looking for a way out for his embattled party by dragging Greece, which has seen violent clashes between anti-austerity protesters and riot police, through a lengthy period of political instability.
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EU-elites must be having a bad morning today after hearing about Mr. Papandreou’s bombshell of a plebiscite. No need to feel pity for them! Perhaps that will motivate them to start thinking what “real help” for Greece would be instead of only focusing on what help for banks is.
Obviously, to actually hold a plebiscite is nonsense. What would it achieve? If the result were “yes”, there would still be close to 50% of the people vehemently opposed to government’s plan. And if it were “no”, it would be a fast road to poverty and perhaps even anarchy. Apart from the fact that one cannot even envisage what question the voters should be asked.
However, the threat of a plebiscite which would bring down the stage of a carefully crafted bank rescue plan for which Greece would be making available her balance sheet is an excellent negotiating tool. Congratulations on that, Mr. Prime Minister!
The big shortfall of all measures to date is that the Greek government is being forced to radically reduce its expenditures without, at the same time, implementing measures to stimulate growth in the economy. The expense cutting on the part of the public sector cannot be avoided. When the public sector shrinks, the rest of the economy must grow in order to keep the overall result bearable for the population.
So the stage is set for a wonderful new approach: the EU has become accustomed to throwing around 3-digit billion EUR numbers in connection with what they call “help for Greece”. With those dimensions, it would truly be “chickenfeed” to throw in, say, another 10 billion EUR for growth projects in the Greek economy. While the 3-digit billion numbers don’t do Greece any good, 10 billion EUR for the Greek economy, if invested well, would produce wonders.
The question would be how that 10 billion EUR are best spent in such a way that one gets “most bang for the buck”; i. e. the maximum of new jobs and new income for Greeks out of productive activities. If the monies are handled by public entities (be that the EU or the Greek government), the risk is that they may to a large degree end up in the wrong pockets. The ultimate test of what a good investment is is whether or not a private investor would also make it voluntarily.
The EU should consider the following: make the 10 billion EUR available to serious investors (inside and outside of Greece) who have convincing investment plans for value-generating new investments in Greece which create jobs and income for Greeks (and income taxes for the Greek government).
And when the EU has finally decided to help the Greek economy, the plebiscite can be called off.
http://klauskastner.blogspot.com/2011/10/good-news-greece-will-grow-again-in.html
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