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Greece heeds the fillip.

Byline: The Register-Guard

On Wednesday, an editorial in this space asked the question, "Must Greece obey orders?" On Thursday, Greek Prime Minister George Papandreou provided the answer, canceling a referendum he had called earlier on the European Union's latest loan deal with his country. In the intervening days, Papandreou got the word from EU leaders: Greece must approve the deal now or prepare to exit the 17-member monetary union that uses the euro as a common currency.

Papandreou has been attempting to play three-dimensional chess, deploying pieces at the international level for domestic effect. His actions since Greece first asked for an EU bailout last year have triggered pay cuts and tax increases that have made him and his socialist PASOK party deeply unpopular.

The latest bailout agreement, reached late last week, promised to bring more of the same. Papandreou made a knight's move by calling a referendum: His critics, he believed, would be forced to support the deal, and responsibility for Greece's painful austerity measures would be spread beyond his embattled government.

But the prime minister found himself checkmated. The leaders of the European Union's dominant economies, Germany and France, made clear that the bailout could not be put on hold for a month or more while a referendum was organized.

What's more, the EU leaders insisted that they could not accept the risk that Greek voters would vote no. And that risk was high if the referendum were perceived as a vote on Papandreou rather than a vote on whether to remain in the euro zone. So Papandreou did as he was told.

Papandreou tried his best to make his cancellation look like something other than capitulation to the demands of foreign leaders. He said the referendum no longer was necessary because the opposition New Democracy Party had announced it would support the loan deal. That achieves, at least in part, his objective of shifting sole responsibility for the deal away from his party.

The prime minister still faces a no-confidence vote in Parliament today, and reportedly has agreed to step down in favor of a coalition government even if he prevails.

For Greece, remaining in the euro zone is a top priority, supported by 70 percent of its population. Greeks understand that they would be cut off from the commercial mainstream of Europe if they were forced to return to their own currency, the drachma. Such an exit would be messy; loans and other financial instruments denominated in euros would have to be converted to drachmas at an exchange rate to be determined, and the euro would continue to be used as a parallel underground currency.

The stakes were also high for the other nations in the euro zone. Greece's departure would crack the facade of the currency union, raising the question of whether other departures soon would follow. The resulting uncertainties would weaken confidence in the economies of countries that might be next on the list, as well as confidence in the euro itself.

Those dangers have been averted, at least for now. But the extent to which nations in the euro zone, particularly the weaker ones, have lost control of their own destinies has been revealed. On the bailout deal, Greeks will have no choice.
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Title Annotation:Editorials and Letters
Publication:The Register-Guard (Eugene, OR)
Geographic Code:4EUGR
Date:Nov 4, 2011
Words:540
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