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Eupdate Game-Changer: The Greek Referendum

posted by Anna Gelpern

The Greek authorities' decision to hold a referendum on the new Eurozone rescue package strikes me as the most interesting and potentially consequential development in the crisis in a very long time. Yes, more consequential than last summer's breakthrough and last week's all-nighter.

I may be unduly influenced by the other European referendum experience--Iceland--where the people have now repeatedly rejected the government debt settlement deal, despite substantial improvement in the terms between the two referenda. But with the entire Greek package on the line and much to pick on, I find it hard to imagine a favorable vote. I also wonder about the implications of holding a vote when so much of the package is up in the air. One outcome of a negative vote might be to empower the government to go back and ask for more favorable terms. Even if the ultimate vote is affirmative, the interim  uncertainty must feeze all the Europrocess coming out of last week's summit. And if a better deal emerges after the first one is voted down, would that too be put to a referendum? Much to talk about in Cannes.


I think it will be really interesting to see how the Greek voters, investors, and the other Eurozone governments decide to handle this debt deal and the results of this vote. I worry that Greek voters approving the deal won't actually be the panacea that it's hoped to be and that Greek voters rejecting the deal will be viewed as far more negative than it actually is (after all they'd be able to continue to negotiate and develop a plan even if this one is rejected).

Many people seemed shocked by the idea of a referendum, but I think it's great that the voters actually get a say. It is their county after all. I think that it is beneficial that the people have a thumbs up/down vote on the issue.

I agree with the first commenter that "it's great that the voters actually get a say". But I disagree that it will be interesting to see how the vote goes. There is no doubt the vote will be anti-sacrifice. Seriously, in a modern welfare state, what are the odds of a majority of voters voting to make significant sacrifices - pay more taxes or receive less benefits? Nil. They will gladly sacrifice someone else's income or benefits but a whole population is not going to vounteer to make sacrifices of their own to pay back government debts. The majority would rather roll the dice and hope something better turns up.
The only thing I find interesting is what will turn up. I doubt any Euro organization or the IMF will lend them anything after default. And what is China or Russia going to do with drachma? Maybe Russia will fund them as a strategic investment. Maybe they'll play the North Korean game and turn to Iran for funding in the hope of scaring the West into funding them.

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