Greece Looks Over the Precipice, Papandreou Resigns

| November 6, 2011 | Comments (2)

No more Papandreou to kick around after today

Greek Prime Minister, George Papandreou is on his way out, finally.

Last week, if you recall, he threw the Eurozone and global stock markets into a tailspin by calling for a referendum on Greece’s austerity program.

Today, Papandreou agreed to step down and allow the creation of a national unity government whose task will be to secure international financing and avert a collapse of the country’s economy.

Having being vilified by the Greek press and population over the past year, the George Papandreou confounded Europe by asking for a referendum on the austerity program imposed by Europe.

This was actually a cry for help by Papandreou, weary of being made a whipping boy by his fellow citizens. He was immediately summoned for a tongue-lashing by Angela Merkel and Nicolas Sarkozy, who warned him that borrowers should not irritate their lenders.

Back home, a revolt by his Socialist party led to the abandoning his referendum and narrow survival of a vote of confidence. He is now on the way out, likely to be replaced by a unity government willing to take the Eurozone’s (and IMF’s) medicine.

None of Greece’s options are good. A return to the drachma and devaluation will mean an immediate sharp fall in the standard of living. Then, they will truly be on their own, with the EU focused on protecting the remaining vulnerable members.

Better for Greece to stay within the EU and take whatever bitter medicine is on offer. This week, it seemed they realized that.

There is now no chance that this will end well. What began with lies and misrepresentations on their entry to the Eurozone will end with default – orderly or disorderly. Investors will likely have to take haircuts way beyond the current 50%, probably 85%.

However, through Papandreou, Greece has now looked over the precipice and will stay in line as the EU and the IMF leads them through this mess. That is preferable to default and the drachma.

They and the Eurozone now have to hope that things will work out after the inevitable pain Greece must endure as they try to reform their economy and profligate spending.

What is your take on the unfolding Greek tragedy?

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Category: News and Opinion

  • Efosa Oyegun

    Ouch!

  • Benson

    Yup, “ouch” will be the Greek response to what’s coming down the pike.