Bye Bye Georgie

Last week I wrote an article on the Greek Prime Minister, George Papandreous, and what I termed “political suicide”. For those who did not read that post or any financial news in the last week for that matter, I will fill you in. Basically George Papandreous decided to announce that he would put the European Bailout Package to a referendum. This decision came out of nowhere and certainly took European markets and leaders by surprise. Putting it to the people meant there was a strong chance it could be vote down and Greece forced to default.

As I mentioned in my original post I said there was no way French President Nicolas Sarkozy or German Chancellor Angela Merkel would let this pass. It also appeared that individuals within the Greek Parliament could also see the dangers of the strategy and were withdrawing their support for George Papandreous. Based on this information and the importance of Europe reaching some level of financial stability I said George Papandreous would be lucky to last a week.

That statement would prove to be correct because on Friday he faced a confidence vote in the Greek Parliament, which he won. This was however, a prearranged agreement. By allowing the confidence motion to pass there would be no need for fresh elections (which would further delay the European bailout) and George Papandreous could then step aside with some form of dignity. Following this move a new unity government will be formed and Greece ready to accept the European Bailout.

Unfortunately for George his approach was misguided and he has now paid the price with his job.

How To Commit Political Suicide

Last week everyone was celebrating the Euro bailout package, stocks where rallying and everyone was appeared to be happy again. Obviously nothing can go up in a straight line, so something had to shake the boat and it happened to be some comments/policy moves by the Greek Prime Minister, George Papandreous.

In what only can be described as political suicide, George Papandreous announced that he would put the European Bailout Package to a Referendum. Now if you have kept even a passing eye on the European situation you would have seen the Greeks take to the streets at every opportunity. They are clearly disgruntled about the austerity measures they face and what they deem “unfair” treatment. Even though it is their country that is burdened with debt and despite the fact that if they were outside the Euro they would have been cut off long ago.

Clearly with such negative sentiment from the Greek people there is a STRONG chance that they would vote NO to the European Bailout, which would have a disastrous impact on the stock market and the chances of a global economic recovery. What I think George Papandreous is hoping to do is to “show” his people that he is still working for them and believes in their support. Unfortunately such a strategy is fundamentally flawed in this situation and anyone who thinks the average Greek has even a passing interest in the financial fortunes of the rest of the world is mistaken in my opinion.

Luckily for the rest of Europe and the World I don’t think the Referendum will get up. I can already picture German Chancellor Angela Merkel and French President Nicolas Sarkozy blasting Papandreous over the phone and putting him back into his place. They have simply come too far to let this political light weight ruin their plans.

Further improving the chance that the Referendum will never get up is the fact that the decision to hold a Referendum must first be passed by the Greek Parliament and overnight the Socialist Pasok Party withdrew from the Papandreous’s coalition leaving him with out 152 seats out of 300. I.e. he has only a very very slim margin and if another one or two cross the floor or jump ship then good-bye Referendum and good-bye George Papandreous.

Don’t be surprised to see him gone by the end of the week in my opinion.

You can read more on the story at Bloomberg.