Back to the Drach? Papandreou May Let Voters Decide



ATHENS – As  pressure builds on Greece to default, Prime Minister George Papandreou is reportedly mulling a referendum to let the people decide whether to give up the fight to stay in the Eurozone, abandon the euro, and return to the ancient drachma the country gave up 10 years when the government lied about its economic condition. The Athens newspaper Kathimerini reported that Papandreou said he believes if he wins,

Greek Prime Minister George Papandreou's insistence Greece will not default isn't convincing the markets

that would give his staggering PASOK Socialist Party a mandate to keep pushing more pay cuts, tax hikes, and slashed pensions to keep the country from going bankrupt and not paying its lenders.

The government has long said it was planning a referendum on political reforms but has repeatedly denied that it would concern the Eurozone. Government spokesman  Angelos Tolkas also denied a referendum was being planned. “No. We haven’t discussed such an issue, definitely not,” but said the government had put a bill before Parliament to hold a referendum but said it didn’t specify what issue it was about. But he also said a referendum was discussed. “Yesterday we tabled a bill about referenda … but we have not discussed anything more than holding a referendum.”

Greece was locked in talks on Sept. 20 with the Troika of the European Union-International Monetary Fund-European Central Bank over a pending $11 billion loan that is part of a $152 billion rescue package that has backfired, creating a deep recession. Papandreou has reportedly already submitted a bill to Parliament to consider the referendum. Without the next installment, Greece will run out of cash in a few weeks but even with it there would only be enough money to last to the end of the year.

Sources told Kathimerini that many of Papandreou’s close aides had proposed the idea of a referendum to the premier earlier this summer as the Troika was demanding more cuts for workers, although complaining the government has done little to go after tax evaders costing the country nearly $40 billion a year in lost revenue.

During an emergency cabinet meeting on Sept. 18, several ministers reportedly pressed for more drastic action, including early elections as Papandreou is being hounded by Antonis Samaras, his one-time college roommate at Amherst but now leader of the major opposition Conservative New Democracy party. Interior Minister Haris Kastanidis said, however, if the referendum results in Greeks wanting to give up the euro, that it could prompt a snap election, and Education Minister Anna Diamantopoulou suggested that PASOK investigate alliances with other political parties, the paper said.

The news agency Bloomberg reported that EU leaders are fighting with each other over what to do as Greece crumbles, fearful that the country has become a money pit and whether piling loans on loans and debt on debt will stave off what many analysts predict is an imminent default, a prospect that Papandreou has steadfastly denied for 18 months while instituting harsh austerity measures.

U.S. Treasury Secretary Timothy F. Geithner said in an interview yesterday that Europe will eventually adopt some of the same measures the U.S. took after the 2008 financial crisis. As tensions mounted, Greece was forced to pay near-usurious interest rates of 23 percent on 10-year bonds, while the rate on two-year bonds skyrocketed to 61.38 percent. Additional measures are needed to reduce the deficit to a sustainable level, Bob Traa, the IMF’s resident representative in Greece, said.