Merkel Called Bankers’ Bluff to Win Europe a Debt PlanToday, add to the roster of EuroRussian Roulette-meisters Greek Prime Minister George Papandreou, who sent the Eurozone into panic mode with his call for a referendum on the EU's latest rescue plan -- apparently to scare his domestic opposition into line. From the FT's liveblog:
Over in Athens, the narrative of today’s developments is becoming clearer. According to the prime minister’s comments to his cabinet, the key turning point appears to have been when Antonis Samaras, the conservative opposition leader, said today that he would be willing to back the new bail-out agreement in order to ensure Greece stays in the euro. The conservatives opposed Greece’s previous bail-out on the grounds that harsh austerity would deepen the country’s recession and leave banks without liquidity to fund investment. Kerin Hope has more from the text of Papandreou’s address to minister at their emergency meeting earlier [FT emphasis]:And a bit later from the FT, more detail [my emphasis]:
“There is no need for a referendum following the conservative opposition’s switch of its position and willingness to back the October 26 package.”
“We must hail the fact that [the main opposition party] New Democracy will vote for the new bail-out agreement.”
“We had a dilemma: consensus or a referendum … Failure to back the package would mean the beginning of our departure from the euro. But if we have consensus, then we don’t need a referendum.”
- Meanwhile, it emerges that the plan is to hold a referendum not merely on the bail-out but on Greece’s very membership of the single currency
- Thursday dawns with news that Evangelos Venizelos, the Greek finance minister, is no fan of the referendum idea
- Zero hour in Athens as Papandreou, on the brink of resignation, summons his ministers
- There is much confusion in the markets
- As the enormity of what might befall Greece should it not receive any more rescue cash and, perhaps, be flung from the euro, becomes clearer, the opposition conservatives reverse their opposition to the bail-out
One measure of Papandreou's sang froid: he put the FTSEurofirst 300 Index into a 5.5% dive over two days while bringing the prospect of Greek expulsion from the EU home to his opposition. A comparable drop rewarded Obama for caving to the GOP in the week following the August 1 debt deal.
Of course, the analogies between Merkel's and Papandreou's crisis negotiations and Obama's are limited on many planes, as are all analogies between disparate events. But I think the center holds, per this exchange
last week with reader MinneapolisPipe:
At bottom, I think Obama was dead wrong when he justified acceding to political hostage-taking last December, in the wake of his tax/stimulus deal:
TODD: If I may follow, aren’t you telegraphing, though, a negotiating strategy of how the Republicans can beat you in negotiations all the way through the next year because they can just stick to their guns, stay united, be unwilling to budge -- to use your words -- and force you to capitulate?And I hope he's learned as much.
THE PRESIDENT: I don’t think so. And the reason is because this is a very unique circumstance. This is a situation in which tens of millions of people would be directly damaged and immediately damaged, and at a time when the economy is just about to recover.