Things move fast in the eurozone. Here’s the latest bullet-point summary from the Guardian as of an hour ago:
- The plan for a referendum on Greece’s membership of the eurozone has been cancelled. Prime minister admits to cabinet that it cannot go ahead.
- There is now growing acceptance that a National Unity government may need to be created. But it is unclear if the New Democracy opposition will agree.
- UK admits that it may have to pay more into the IMF to support financial recovery. David Cameron says it’s the right thing to do
- Finance minister Evangelos Venizelos forces PM’s hand in early morning speech. Eurozone membership too important, he said
- European Central Bank cuts interest rates. Mario Draghi lowers borrowing costs to 1.25%
Well, that whole referendum thing didn’t last long, did it? What’s unclear to me is what Prime Minister George Papandreou’s original goal was. Option A: He wanted to use the threat of a referendum — and a possible No vote — as leverage to get a better deal out of Germany and France. Option B: He wanted to use the referendum as a way of forcing his own citizens — and his political rivals — to come firmly to grips with the cost of rejecting the deal on offer from France and Germany.
I sort of assumed originally that Option A was his motivation, but in the end it looks like maybe it was really Option B. Papandreou had spent months negotiating this deal and felt like it was the best Greece was going to get. But riots in the streets were continuing, his own party was rebelling, and the opposition was licking its chops at the possibility of the government falling. So he wanted to force everyone’s hand with something dramatic. The referendum, it turns out, was probably his version of a come-to-Jesus moment. Do you really want the government to fall? Do you really want to reject the deal and (probably) exit the euro and leave the European Union? The answer, it turns out, is that everyone blinked. Maybe the deal isn’t so bad after all. Maybe a government of national unity isn’t a such bad idea either.
Anyway, that’s the latest. Stay tuned.
(And keep in mind that even if Greece now accepts its fate and takes the deal, there’s still plenty of skepticism that the deal is enough to save the eurozone. The fat lady hasn’t sung yet.)