We will not get to see the precise wording of Prime Minister George Papandreou's referendum because enough cowards in the Greek parliament in conjunction with blackmail by Merkel and Sarkozy have put an end to Papandreou's regime.
Thus, the on-off on-off Greek referendum is once again set to "off" this time permanently.
Equity markets reacted positively to the referendum cancellation and also to the surprise rate cut by the ECB, but the euphoria will not last (except perhaps for gold).
Please see ECB Cuts Rate .25 to 1.25% in Surprise Move; Draghi Says Exit of Any Nation From Euro ‘Not in the Treaty’; Half-Truths and Blatant Lies; Case for Gold for a a discussion.
Grand Plan Becomes Eurozone's Waterloo
Steen Jakobsen, chief economist at Saxo Bank says The Grand Plan for Europe became the Waterloo of the Eurozone
Weak Economies, Weak Leaders, and Greece on the Brink
The pre-Cannes meeting between Merko-zy and Papandreou did not change the mind of the Greek Prime Minister. The vote of confidence or more precisely the lack of it, is still going ahead and will probably culminate tomorrow, Friday.
This morning the Greek Finance Minister is indicating his displeasure with the PM by publicly opposing Papandreou - this is political posturing developing into a contention for the leadership of the political party PASOK. There is a brief rally in the market based on the idea, wrongly in my opinion, that the finance minister can and will take over and win a confidence vote, but the facts remains the same:
- Greece has been pushed too far and has not complied with the austerity it promised
- We are beyond any proper solution for this mess and only the 'blame game' remains with Greece potentially leaving the EURO inside of the next three months.
Note also that the influential newspaper Bild Zeitung this morning is calling for Greece to be thrown out of the EU and to have a German referendum on the bailouts.
Waterloo of EU
Last week's EU Summit looks more and more like the Waterloo of the EU.
The EU has overstretched its ability and resources and the next 48 hours is yet again about saving the concept of the Eurozone as a powerful, pragmatic way of conducting fiscal and monetary policies, but in reality we have become saturated with debt, empty promises, and a political system which is reduced to producing plans for later plans.
I have not agreed with much in the New York Times recently, but today's editorial Greece on the Brink is nearly flawless. Here are a few snips.
Europe’s leaders should have paid more attention to the distress of ordinary Greeks and less to the distress of well-heeled European bankers. Rather than trying to punish the “profligate,” they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9.Democracy Dies to Protect Banks
Greece needs to make serious, painful reforms, including doing away with antiquated labor rules, streamlining a bloated public sector and selling off poorly managed state assets. Mr. Papandreou was already making real progress. But it was becoming impossible to keep laying off thousands of state workers while austerity choked off any realistic possibility of their finding private sector jobs or to keep slashing social benefits and services while the numbers of poor and unemployed surged.
It is late but, we hope, not too late to avert a full meltdown. Europe’s leaders need to renegotiate the pending Greek bailout deal to emphasize reform and growth over unremitting austerity and offer other bailout applicants the same approach. If they want any of the money lent to Greece paid back, Athens needs room to grow and earn.
Chancellor Angela Merkel of Germany, President Nicolas Sarkozy of France and others are now rushing to blame the Greeks for the summit package’s rapid unraveling. They need to take their own full share of responsibility for this crisis — and finally fix it.
The spot-on sentence is "Rather than trying to punish the 'profligate', they should have thought about the consequences of condemning Greece to years of negative growth, soaring unemployment and rising taxes with nothing promised in return except that maybe, a decade from now, its ratio of debt to gross domestic product might get back down to the problematic levels of 2008-9."
Indeed, resolution of this mess has been 100% about how to bail out banks at taxpayer expense even though banks brought this mess on to themselves by treating sovereign debt as if it had zero risk.
Worse yet, banks plowed into sovereign debt trades with massive leverage.
Eurozone is Unfixable
My one quibble with the article is the Eurozone is not fixable.
Merkozy and the EMU ought to be spending time on developing a full blown Euro exit strategy for nations because there has never been a currency union in history that has survived without a fiscal union in place at the same time.
Germany is Last Hope for Sensible Democratic Referendum
EMU officials and political opportunists like Merkozy may have been able to ram through some sort of forced agreement in a majorly undemocratic fashion but fortunately the German supreme court has insisted on a referendum for major treaty changes.
Please see Germany's Top Judge Throws Major Monkey Wrench Into Leveraged EFSF Machinery, Demands New Constitution and Popular Referendum for Further Powers for details.
Today, democracy died in Greece. The last hope for a sensible democratic action culminating in a relatively sanguine breakup of the Eurozone rests with Germany.
German voters will get their chance sooner or later. Here is the choice German voters will face:
- German citizens agree to join a full-blown Eurocratic Nanny Zone (ENZ) giving up sovereignty on nearly everything that matters.
- The Eurozone breaks apart.
There are no other choices, only half-way proposals to temporarily forestall the inevitable. Either way, there will be much pain for Germany.
Mike "Mish" Shedlock
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