On the verge of a Greek tragedy
The move may have been a political gamble by a politician under unbearable pressure. Equally, it might have been a sign that the man was cracking up.
Whatever the case, the move has backfired spectacularly.
When Georges Papandreou was summoned to Cannes to receive a dressing down from the eurozone leadership, he was accompanied by his Finance Minister, a burly lawyer and seasoned politician.
Evangelos Venizelos, it appears, broke ranks with his prime minister on the return journey to Athens pressing him to abandon a referendum plan which was welcomed by few people in Greece apart from the country’s vocal band of hard leftists.
In the early hours of the following morning, on Thursday, Venizelos went public with his opposition, precipitating a humiliating climbdown on the part of a leader whose career appears to be on a slender thread.
As the Greek political class went into a spin, Venizelos appeared to have steadied the political ship, temporarily.
He was quick to reiterate his commitment to Greek membership of the Euro amid speculation that this country was headed for the exit — quitting not just the eurozone, but perhaps also, the European Union.
But the genie could not be pushed back into the bottle from which it was released at the start of the week.
Across Europe, patience with Greece — already stretched to breaking point — snapped.
Merkel and Sarkozy, back dancing in unison, did a Rhett Butler and told the Athenian Scarlett O’Hara, in effect, that frankly they didn’t give a damn any more.
The two leaders admitted for the first time that a Greek exit from the eurozone was a possibility — something never hinted at before. The Greeks, it seems, could soon be gone with the wind.
A European Commission spokesperson chipped in to point out that exit from the eurozone would be followed by exit from the union itself.
The anger of “Merkozy” was understandable.
The Greek referendum plan sent the markets into a tailspin. Papandreou’s initial suggestion of a January vote promised at least two months of market turbulence, enough to spread waves of financial contagion across the eurozone and well beyond.
The yield on Italian Government bonds jumped past the 6.3% mark, pushing Italy back into the danger zone and its “bunga bunga” Prime Minister Silvio Berlusconi ever closer to the precipice.
These days, firewalls are the flavour of the month. Experts are now speculating about the implications for Greece and its partners of an exit.
A full blown debt default event would be triggered, stretching the financial system to breaking point and possibly sparking a run on the banks in other threatened eurozone countries, all of which leaves the new ECB President, Mario Draghi with much to ponder.
This week, Draghi chose to put distance between himself and his predecessor, Jean Claude Trichet, by surprising the markets with a quarter point rate cut.
Many have questioned whether a Greek exit could be achieved, without a calamitous degree of disruption at home too.
It is not a simple matter of printing lots of Drachmas and allowing the new currency to crash to the floor, paving the way for an Argentinian style recovery.
At the very least, Greeks would first have to go through a horrendous interim period during which the savings of much of the middle classes would be all but wiped out.
The country would default in an uncontrolled manner on all debts owed.
It would be questionable whether further aid from the IMF — never mind Europe — would be forthcoming.
The Greek people could be facing into penury of a form not endured since the Second World War and the nasty civil war that followed the German occupation.
Greece would be a pariah and could well be faced with tariffs walls erected by former EU partners in no mood to play footsie with her. The consequences of a financially broken country, a NATO member, perhaps beholden to Russia, do not bear thinking about.
Recovery, Argentina style, could come, but the jury remains out on that given the parlous state of Greece’s economy — its default would dwarf that of Argentina in 2002, and comes at a time when the international economy is deeply stressed.
Meanwhile, the European establishment is still likely to place some faith in those elements in the country’s ruling class who could be trusted to eventually deliver a modicum of stability to the country.
For Venizelos, a Professor of Law and trusted adviser to successive Greek leaders, this could be his moment — and equally, that moment could be gone in a flash. As the old saying goes, opportunity comes to pass — and not to pause.
The finance minister has been less than six months in the job, having served in several cabinet positions right back to 1996. His appointment to succeed a financial technocrat was not well received in Brussels and Frankfurt. He was seen as one of the socialist party barons who have been more part of the problem than the solution.
Venizelos first emerged as a prominent figure when he defended the former prime minister Andreas Papandreou, father of the current incumbent, against corruption allegations.
Andreas was a populist politician and orator, who ran off, bunga bunga style, with a woman almost 50 years younger than him.
After his Panhellenic Socialist party, Pasok, came to power in 1981 he stuffed the Government service full of party placement, helping to create the creaking state bureaucracy which has the place in such a mess.
His American-educated son has been left to clean up the monumental mess that his father bequeathed his country.
The Opposition New Democracy Party has also little to boast about.
During its period in power, deficits ballooned and were carefully concealed. Its leader, Antonis Samaras, has behaved in an opportunistic fashion, insisting that the austerity pill can be sugared with tax cuts.
Samaras appeared to rule out power sharing with Pasok.
Venizelos may be tainted by association with successive administrations but he is seen as a wily operator who could now do everyone a favour by facilitating the emergence of a technocrat-led administration to lead the country through to an early general election by endorsing the bailout and ensuring the payout of the €8bn tranche of funds.
Failing such agreement, Greece will start running out of money in mid December and then things could get ugly indeed.
Never has a country needed an experienced political fixer. Never has the EU needed such a period of stability in a peripheral member state at a time when the storm floods threaten to burst through the defensive barriers that for now, protect us all.
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