Tuesday, September 20

Greek Referendum on Leaving the Euro

Update: a rumor no longer. Latest polling shows 60% of Greeks oppose last week's bailout deal, while 70% want to keep the euro. The vote will supposedly take place sometime early next year. I stand by my earlier prediction that this vote will never take place for the reasons described below. The prospect of a Greek vote on not just the bailout but Eurozone membership, hanging over the financial system like a Sword of Damocles, cannot possibly be tolerated for the next three months.

The latest rumor:
As pressure from Greece’s foreign creditors and austerity-weary citizens mounts on the government, Prime Minister George Papandreou is considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the eurozone or by exiting the single currency. 
According to sources, Papandreou hopes that the outcome of such a vote would constitute a fresh mandate for his Socialist government to continue with an austerity drive backed by Greece’s international lenders -- the European Commission, the European Central Bank and the International Monetary Fund.

A bill submitted in Parliament, paving the way for a referendum to be carried out, is to be discussed in coming days.
Here's the source.

Will Greeks be allowed to vote on whether or not they want to remain in the Eurozone? Extremely unlikely, IMO.

The Eurozone is like the Eagles' Hotel California: countries which have been invited can check in any time they like, but they can never leave. A formal legal process for leaving the Eurozone was intentionally left out of Maastricht.

The situation on the ground in Greece is already incendiary enough as it is. Putting the euro to a Greek vote, while democratic, would trigger far too much chaos. And if the majority voted in favor of leaving the euro and returning to the drachma there would be an immediate, full run on Greek banks (if it hadn't already been completed in anticipation of the voting result).

If Greece decides to leave the Euro, which looks increasingly likely, it won't be done through a popular vote.

Why oh why on Earth is anyone still keeping their euros in a Greek bank? Or to put it another way, why aren't the Greeks behaving more like the Irish?

1 comment:

  1. John Taylor, who runs the world's largest currency fund and has been pretty spot on with his calls of late, thinks there will be a Greek referendum this fall: