Economist
November 3, 2011
Since Greek Prime Minister George Papandreou declared his intention to hold a referendum in his country on the recently negotiated rescue plan, the situation in Athens has been somewhat volatile. The world was abuzz last night with the news that after summoning Mr Papandreou to Cannes, where G20 leaders are presently meeting, Angela Merkel and Nicolas Sarkozy essentially suggested that the Greeks could vote if they liked, but if they nixed the deal the euro zone would show their country the exit. Given the deep uncertainy over the impacts of a Greek departure from the euro zone, this has widely been interpreted as a high-stakes bluff. It seems unlikely to be necessary, however.
Mr Papandreou's government is now at serious risk. High-level ministers are abandoning him over the referendum plan, and he may not survive a confidence vote scheduled for tomorrow. The anger with his strategy seems to be rooted in a concern that the prime minister will accidentally get Greece kicked out of the euro zone. If the Greek citizenry is tired of the single currency, the sentiment is not yet reflected in the views of elites.
Should the government fall, a snap election will be held, and something will happen. One strongly suspects, based on the almost shocking placidity of markets, that a new government will come in and implement the cuts demanded of the country so that we can all move on to the next phase of the crisis, which is sure to hit any day now, probably about 600 miles to the northwest.
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