The Trojan Horse

The lead article in today’s New York Times, “Revolt in Greece on Bailout Vote May Oust Leader,” shows that theoretical decisions agreed to in faraway Brussels to save the Euro, and the austerity program they imposed on the Greek people, can backfire when the people themselves express their opinion on the matter.

The surprise decision by the Prime Minister of Greece, George Papandreou, to hold a referendum on the terms imposed by, among others, Angela Merkel of Germany and Nicolas Sarkozy of France, was originally initiated to get the imprimatur of the Greek population to provide political cover for what will be a very difficult transition requiring sacrifice by the public. It appears to have backfired by resulting in the potential fall of the government instead.

Even worse, the inability to get the Greeks to abide by an austerity program to justify their bailout could have a major impact on the possibility of getting larger economies such as Spain and Italy to do the same. Of course, the financial markets weren’t too pleased about any of this.

The no-confidence vote on Mr. Papandreou is scheduled for Friday. He now faces opposition from both sides of the spectrum — Socialists who think he is abandoning the welfare state and those who think he hasn’t done enough to shore up the economy. Both are displeased with the referendum he has proposed.