Oh yes, this is a fabulous move

Greece is to hold a referendum on whether to accept the rescue package from the European Commission, European Central Bank and International Monetary Fund troika.

As Jeremy Warner says, Greece should vote against the deal.

No, not because I\’m a rabid eurosceptic who would just love the project to fall apart. Although I am and I would.

But because a rejection of the deal, while causing intense short term pain, would in fact solve the problem in the best possible way for Greece.

Essentially, it\’s the Iceland option. Default, possibly even repudiate some or all of the debt, bring in the New Drachma and get the problems entirely behind them, start with a clean sheet. And a competitive economy.

An amusement about it is that the EU\’s continual kicking of the can down the road is what has actually made this possible without entirely destroying the European banking system. For what has happened over the past 18 months or so is that the ownership of the debt has moved from being wholly private sector held to being largely (I think it\’s a majority now, or damn close to it) public sector. The ECB, EFSF and so on.

Almost all of this debt is issued under Greek law so there\’s no problem (there\’ll be a lot of whining though) with redenominating it into the New Drachma. And it will be the eurozone taxpayers that take the hit…..no, not gloating about that…..meaning that the European banking system does not collapse into a pile of smouldering rubble. The ECB, EFSF, they\’ll not be in good financial shape, that\’s true.

But it\’s better this than a decade or two of \”internal devaluation\” or, as we could put it, the grinding down of the Greeks into the dust at the behest of the Troika.

19 comments on “Oh yes, this is a fabulous move

  1. Someone earlier today noticed that this means the Bail Out is dead already. As the Greeks won’t vote for it.

    Didn’t even last a week.

  2. They could make proof of tax payments a precondition for voting rights. That would make the result less predictable. Clever move by the Greek PM though, whatever bad things happen he can point to this and say “you could have voted the other way”.

  3. Should have happened long ago. It’s very evident that the measures being imposed on Greece by the Brussels cabal have stuff all support from the Greek voters. Thank heavens democracy is rearing its ugly head again.

  4. A stroke of genius. I’m still giggling a day later.
    Papadop gets a mandate or he gets martyrdom (very popular in the Balkans).
    The Greeks get breathing space to plan for the new currency.
    The EU is obliged to carry on hosing them down with money and to pretend they like democracy.
    It’s nearly all good news, what could possibly go wrong?
    Hmm, in 3rd world elections, they always have “EU observers”…

  5. Democracy is a beautiful thing isn’t it? Would be even more fun to give German taxpayers a referendum too, on whether they want to pay up.

    By the way the reason those Greek demonstrators were Godwinning themselves at this juncture was that 28 October is Oxi/Ochi/Ohi Day – a big national day commemorating Greek entry into WW2 in 1940. In particular it celebrates the massed response of the Greek population – they’ve liked a good street demo for a long time.

    The story goes the Greek dictator Metaxas was presented with an ultimatum by the Italian ambassador at the German embassy. The Italians wanted to occupy Greece. Metaxas said ‘No’ (‘Ohi’ – actually he said ‘alors c’est la guerre’ but that rather spoils the story). On hearing the news, the Greek people surged into the streets. They too chanted ‘Ohi’.

    So last week, on National ‘No’ Day, when crowds of demonstrators were protesting (as they saw it) for the protection of their livelihoods, dignity, quality of life and the right of their country to govern itself, against a German-led Troika who have taken over the ministries and the direction of national policy… on the anniversary of the day millions of Greeks took to the streets to say ‘No’ to a takeover by the Axis Powers … that’s a heady mix, and apparently this toxic national mood meant Papandreou felt obliged to grant a referendum. The symbolism of a vote for ‘Ohi’ is going to be VERY powerful.

  6. There is a further potential benefit if the referendum votes no and Greece defaults in effect one way or the other, which is that predatory hedge funds which recently bought Greek private debt at a written down value in the expectation of being able to insist on repayment at par and a huge profit at Euro taxpayer expense may get their nuts burnt. That would be an excellent result

  7. How come the German people are not being given the chance to vote on all this? They are, after all bankrolling the whole crazy edifice. When it finally crashes, everyone will be able to go back to facing the real crisis the West faces, the inexorable ransfer of economic strength to the Far East. At least they will be able to face it with self levelling currencies.

  8. “As the Greeks won’t vote for it.

    They will……..eventually.

    It might take 2 or 3 goes but eventually they will get bored and vote for whatever it takes to save the Euro.

    Sod the economic impact, the politics of the Euro are far more important than a few national economies.

  9. The EU’s efforts to subvert this referendum will make the CIA look like the Electoral Reform Commission.

    They are going to play very dirty indeed.

  10. We are also going to have the delicious sight of the Guardian et all backing the Greek public for demonstrating and rioting against the deal, but then horrified when they vote against the deal and ditch the Euro.

  11. Rob – Agreed.
    And the EU has all the experience of the second Irish referendum on the Lisbon treaty, so they will know how to rig it. Basically very thorough market research and overwhelming funding to counter the arguments which different groups advanced for voting No the first time.

    Also, if I were the EU’s man in Athens I’d be saying very quietly and regretfully “What a pity for Greece to leave the European family whilst Turkey is such an excellent candidate for EU membership.

    With the nearby example of Yugoslavia, the Greeks know just how far EU/NATO will go to expand and keep its empire. Unless Russia were to support the Greeks, I cannot see their political class standing on its own feet.

    Also (as the EU’s man) I would have many suitcases of euros, quite a few of them for the General Staff of the Armed Forces – just in case.

    As the opinion polls now show a 60% majority against the austerity package, we will be ably to measure the effectiveness of EU propaganda quite precisely. British referendum campaigners could learn from that – but probably won’t.

  12. Pingback: The Eurozone debt crisis and the Greek dilemma | Catch21 Productions

  13. Isn’t the biggest lever over the Greeks that they’re running a primary budget deficit? The protestors are basically arguing for ‘European Solidarity’ – the eurozone’s overall deficit is not too bad, eg compared to the USA or Japan, ergo the stronger members should aid the weak. Unfortunately the Germans aren’t up for it.

    With a primary surplus (like Italy, IIRC) the Greek counter-gambit could be ‘fine then, we’ll walk away from our debts to you lot AND be better off, and won’t even need to find a fresh sucker to lend to us’. Since this would involve taking a nasty hit, the north Europeans might be prepared to be more generous. (Would be a tempting option actually, is this why Italian debt’s getting more expensive to service? Risk premium and all that?)

    But with a primary deficit, walking away and having the Germans pull the plug would mean MORE austerity. There are potential upsides as TW details above but the campaigners who are against austerity would be in a very difficult spot. I’m not convinced there will be a referendum but if there is, one way to win it is to make the alternative choice highly undesirable to the voters. Which if you’re holding the purse strings may not be too hard.

  14. And what do we make of this news….

    Greek military top brass replaced.

    In a surprise move, the defence minister proposed on Tuesday evening the
    complete replacement of the country’s top brass.

    At an extraordinary meeting of the Government Council of Foreign Affairs
    and Defence (Kysea), which comprises the prime minister and other key
    cabinet members, Defence Minister Panos Beglitis proposed the following
    changes to the army, navy and air force and the general staff:

    General Ioannis Giagkos, chief of the Greek National Defence General
    Staff, to be replaced by Lieutenant General Michalis Kostarakos

    Lieutenant General Fragkos Fragkoulis, chief of the Greek Army General
    Staff, to be replaced by lieutenant general Konstantinos Zazias

    Lieutenant General Vasilios Klokozas, chief of the Greek Air Force, to
    be replaced by air marshal Antonis Tsantirakis

    Vice-Admiral Dimitrios Elefsiniotis, chief of the Greek Navy General
    Staff, to be replaced by Rear-Admiral Kosmas Christidis

    It is understood that the personnel changes took many members of the
    government and of the armed forces by surprise.

    http://www.athensnews.gr/portal/8/49916

  15. Whats the betting that the Greek PM stands down within the next day or so? If he goes the referendum goes and the Euro project continues as dictated by France and Germany with further integration and centralisation of powers.

    An interesting few days ahead I think. Buy popcorn and enjoy the spectacle.

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