The shoe drops (cut and run)

Greece’s prime minister unexpectedly announced a referendum to approve a second EU bail-out deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit.

More here, and here, but that’s all you really need to know.  The so-called eurozone deal didn’t last a week, not that there was ever a deal in the first place.

p.s. they’re not going to vote yes on the referendum!


In the modern mass society Direct Democracy is inadvisable full stop. At a moment and place like this the full stop should be a long row of exclamation marks each the size of ancient Greek columns. It's a comedy right.

How is it a bad idea? The public will vote No, which is the right course - Greece should simply default and leave the Euro. At this stage it is the only reasonable policy.


The only countries I can think of with direct democracy are switzerland and Liechtenstein and both are run remarkably well.

California has an abundance of direct democracy (propositions), and nobody would claim that it is remarkably well run.

Switzerland's real secret is that it is heavily federalised. There are 26 cantons in a country of just 7.8m. Each canton has considerable independence on everything from taxation to welfare, healthcare, education, and law enforcement. California's municipalities and counties have more narrowly-defined powers.

Health insurance, while priced regionally, works the same nationally (health insurers have to offer a set of services that everyone has to buy).

Health care provision on the other hand is in the hands of the cantons (and no, that is not necessarily a good thing, you end up with a lot of duplication that is painful to reduce)

California's problem is demographic.

Liechtenstein is hardly a direct democracy on the Swiss level. Whenever the Prince does not get his way, he threatens to leave which would hurt the country

Describing Greece as "austerity-hit" is a creative bit of blame shifting. That's like proclaiming a sick person as being antibiotic-hit.

You missed winning the thread "one and done" by a mere 11 minutes. I am so stealing this analogy. Bravo, Sir!

The chap in the Sunday Telegraph said it wouldn't last a fortnight. Decent bracketing fire, I'd say.

In the recent past a whole sequence of "no, this time we really mean it" half-measures were trotted out every few weeks to restore confidence and end the Eurocrisis once and for all. Each one rapidly croaked under the pitiless gaze of the markets. Then in October everyone chugged a keg of Kool-Aid in anticipation of the fix to end all fixes. For instance, the S&P 500 had its best month in nearly 20 years.

Alas reality seldom lives up to wishful thinking, and the problem now is that there are no more rabbits to be pulled out of the hat. Well, maybe one more, if they can get China to make encouraging noises during the G20 summit next weekend. But basically if it doesn't work this time, the bazooka is out of ammo and Wile E. Coyote will have a long, whistling fall to the canyon floor.

I have a sudden image of Wile E. Coyote finding himself in midair, and with no other support, firing bazookas down-ward at an angle in an attempt to maintain altitude & gain momentum. I'm thinking this is more like the cliff face that he smacks into (various market positions losing 100% value) followed by the long drop (Greek economic collapse, at least).

That is such a brilliant analogy, given that bazookas don't have recoil. Bravo.

Indeed, a funny analogy.

Not quibbling here, but how are any kind of noises out of China going to keep the kool aid effect going... confidence has become an exponentially cumulatively rare commodity the longer the process takes, like any down-slope from an acid hit the night before, it's a bad trip from here on down precisely because the decades long party was so great, the simple laws of gravity for kicking in for Icarus.... FINAL SEQUENCE...and super nova!!!!

As to the Chinese, I think they grasp the basic concept of "never catch a falling knife"

Well, obviously the wishful thinking is that white-knight China might throw a few hundred billion at the euro zone. "Encouraging noises" at the G20 summit in the form of an artfully-worded non-commitment "commitment" to participate in the Euro rescue effort might pump one last giddy blast of air into the markets before reality sets in again for the umpteenth and last time.

Why won't they vote yes?

Because they want more [just like the rest of us]!

Good game ... so far.

Because Greeks are not going to vote to work harder and pay more taxes to bail out the French and German investor-class.

French and German investors that had been lending the Greek Government money. Which means, those investors were paying for the Greeks massive welfare/government employment system for years and years.

I think the Greeks aren't thinking this all the way through, if they burn the investors, their government will be unable to raise any more money through borrowing. So either they take a hit now or they take a much bigger hit in two months.

Welfare states don't tend to foster low time-preference.

If the Greek populace was good at long term thinking they wouldn't be in the mess they are currently in, would they?

So while your analysis is correct, it really doesn't matter. Giving the banks a black eye will feel good right now, regardless of the long term consequences. So, emotion will triumph over logic.

Accepting the money comes with a whole host of required spending cuts and tax increases that the Greek people aren't willing to accept.

As does defaulting.
Whether the Greek voters will realise that is, of course, a moot point.

They might. We don't know what the question is yet. If it becomes clear that a 'no' will necessarily result in ejection from the eurozone, Greeks might decide to vote 'yes'.

I bet the Yes vote will be a lot higher than anyone thinks, I'd even be willing to put money on it passing if the odds were right.

There needs to be a referendum anyway, because if the Greeks get the money and the conditions and yet the Greek public doesn't feel consulted it will be a guaranteed fail, and worse than nopackage in the first place. But if the plebiscite passes then it will be a huge moral victory for the reforms and it is much more likely austerity won't tear the country apart. As I see it a referendum is win-win.

I'm not sure the referendum matters. History has shown that referendums in the EU are routinely ignored in favor of union.

A three party game: the Greek government, the Greek people who vote in a referendum, and the EU.

Whose bargaining position has improved in possible future negotiations with the EU between now and January with the introduction of this new player, and whose position has been weakened.

The EU's position has been weakened and the government's negotiating position has increased.

We are aren't as rich as we thought? - isn't that another tag line here?

Well, pretend all we wish, we aren't as rich as we thought. And if the Greek haircut becomes 100%? Maybe interest rates will be forced to rise at what one could argue is an inopportune moment.

Even more importantly, blatant cases of fraud and manipulation will no longer be so easily swept under the rug of higher bonuses for bankers at taxpayer expense.

Talk about a systemic threat - no wonder this is a crisis. Unlike this piffling bankruptcy - 'MF Global is also one
of 22 primary dealers authorized to trade U.S. government securities with the Federal Reserve Bank of New York.'

Greece is just a brick - the windows are everywhere.

I don't think the train drivers will be voting yes:
(A nice microcosm of the Greek economy.)

Seems there are still too many unknowns. The exact question is still to be developed and it could be a couple months before there is a vote. That is a good deal of time for education, propaganda, or what have you about the expected consequences of voting no.

Again, people who live off other people's money and who pull future savings forward in order to spend it don't take the long view of things.

Wait for your local greek bank, with whom you have deposited your savings or have a checking account, tells you that you, as a Greek citizen, will take a hit in your savings, checking and other accounts.

Looks like a time for German banks to open offices in Greece or to open online checking or savings accounts for Greeks.

While the austerity measures are unpopular in Greece the Euro is very popular, thus assuming Papendreou frames the referendum in terms of staying in the Euro zone then he stands a good chance of winning. Viewed in this light the referendum may actually be a smart move as it buys time (a couple of months will be required to organise it) and it will allow him to apply pressure on the EU/IMF to improve the bailout terms since the latter are more afraid of a default than the Greeks.

HSBC has a number of convenient branches in Greece.

Now do we really believe that all but the truly dim in Greece has long ago transferred their savings out of the country?

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