We’re thinking that PM George Papandreou’s latest proposal to hold a referendum on the conditions of Greece’s latest bailout is not going to happen.First, it’s probably not even legal. Even if it is, however, we think elections are a lot more likely.
– No one’s even sure that Papandreou’s proposal is legal. According to Greek laws, he’s not allowed to call a referendum on fiscal matters, only on matters of national importance. The legality of the referendum could rest on how he phrases the question.
– Political pressure from within Papandreou’s PASOK party is mounting. An MP from that party resigned this morning, and then six senior party officials sent a letter to Papandreou calling on him to resign. That’s taken his majority down to 152 MPs in a 300-member parliament, with six clearly in uproar.
– Papandreou’s margin in a planned confidence vote on Friday is looking ever slimmer. He already had to boot one MP from the party during the last austerity measure vote, and there’s no telling how many could be questioning their loyalty now.
– The pressure from opposition parties is also intensifying. Conservative leader Antonis Samaras trash-talked both Papandreou and the referendum today after meeting with Greece’s president (via Reuters).
– No one in PASOK wants new elections that will probably compromise their majority, but this is the kind of matter they might jeopardize that for, particularly considering the leading coalition’s political sacrifice in Slovakia. No one wants to be responsible for bringing down the global economy. This also heightens the probability that they’ll try to talk Papandreou out of his plan.
– The rest of Europe could play a role in not holding a referendum. Sarkozy is “dismayed” and everyone feels the situation is incredibly dangerous. European interference could buoy a “no” vote in Parliament Friday.
Elections would surprisingly have a more positive effect on markets than a referendum. The conservative New Democracy party is gaining steam among voters, and would likely be amenable — though perhaps through different measures than PASOK — to the kinds of economic reforms that the rest of the eurozone and the IMF will stipulate.
And with Papandreou calling a meeting of cabinet ministers this afternoon (according to Dow Jones), it looks as though he’s beginning to realise just how much of a gamble a confidence vote on this referendum could be.