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Greek PM Papandreou: referendum flip-flop a political ploy

The prime minister claims the referendum was successful in neutralizing opponents. Now, the opposition is demanding his resignation.

George papandreou greece 2011 6 24Enlarge
Greek Prime Minister George Papandreou addresses a press conference at the end of a summit of the EU heads of State on June 24, 2011 in Brussels. (Jean-Christophe Verhaegen/AFP/Getty Images)

ATHENS, Greece — The referendum is off. The rescue deal is on. And Prime Minister George Papandreou might be out.

Or not. This is Greece, after all.

Papandreou's immediate future as prime minister will be decided in a confidence vote scheduled for Friday night. It's by no means a sure thing.

This week, he shocked the world, roiled markets and gambled his political future by proposing a referendum on the bailout — and effectively, on Greece's membership in the euro zone. The move was widely viewed as a political blunder.

VIDEO: Greeks express outrage

Papandreou has a different take. He claims it was a brilliant tactical move — and that it worked.

On Thursday, he nixed his controversial referendum plan. 

But he only agreed to abandon it after opposition leader Antonis Samaras also reversed course — announcing that he will support the rescue package.  Therein lies the alleged victory.

The 59-year-old prime minister told his cabinet Thursday that actually going through with the referendum was never the goal. Rather, proposing it was a hardball tactic to gain support for the bailout from Samaras and his conservative New Democrat party.

Samaras has been a fierce critic of the government. Just last week, he slammed the prime minister for signing away Greek sovereignty. He said the deal would result in "another nine years of poverty and collapse."

On Thursday, however, amid the turmoil surrounding the referendum, Samaras said that he would now back the bailout, arguing it's the only way to stave off bankruptcy. But Samaras, who advocates tax cuts, said he would reserve the right to renegotiate terms of the new bailout.

Related: Is Greece ungovernable?

Papandreou hailed Samaras’ switch as vindication of his position.

"I, for one, am glad even if we don't go to a referendum, which was never the purpose," he said, according to a transcript of his speech posted on his website.

Papandreou, however, insisted in a speech to parliament late Thursday that the referendum wasn't a bluff: "We were absolutely sincere."

He said he's willing to go to a new election, but that it can't be rushed.

Having the Greek opposition fall in line with the government over the bailout may seem like progress. But it doesn’t mean that Samaras and Papandreou — old friends who attended Amherst together in the 1970s — are in lockstep.

Earlier Thursday, Papandreou approached Samaras about participating in a coalition government. Papandreou had faced open revolt from within his own party over the referendum, creating a rift that might be beyond repair.

Samaras, in a speech to parliament, outlined his demands. He wants Papandreou's resignation, creation of a transitional government to shepherd parliament through the bailout ratification, then snap elections. He said he's not interested in power sharing with Papandreou.

"Give the Greek people the opportunity to decide... on the new prime minister," said Samaras, whose party is leading polls, although without a majority.

Finance Minister Evangelos Venizelos told parliament late Thursday that a snap election would jeopardize bailout funds because Europe would wait for the result, then seek new assurances on its conditions before releasing funds. By then, Greece would go broke, and would be unable to pay wages and pensions, he said.

Any party vying to lead the government, he said, must "commit to accepting the whole package of conditions" from last week's bailout
deal.

But earlier, Samaras had said new elections are "not negotiable."

Despite the domestic chaos in Athens, the scrapping of the referendum should provide at least temporary relief to financial markets and Europe, easing fears of a Greek default, which could trigger a Lehman-style global crisis.

The bailout agreement from last week calls for $180 billion in public funds for Greece, as well as a 50-percent write-down of Greece's debt held by private investors. That write-down would save Greece about $140 billion.

It would be the second major bailout for Greece, which is staying afloat thanks to a $150 billion loan negotiated in May 2010. It is paid out in installments, tied to tough austerity measures designed to get Greek spending under control. Those measures include tax hikes and salary cuts that have sparked fierce public backlash.

Greece is only weeks away from bankruptcy without the $11 billion installment that has already been approved by international lenders.

German Chancellor Angela Merkel and French President Nicolas Sarkozy on Wednesday told Papandreou in an emergency meeting in Cannes that they would block the funds until resolution of the surprise referendum.

With Greece under threat of ejection from the euro zone, Venizelos early Thursday broke ranks with Papandreou, saying Greece's place in the euro "cannot be put in doubt."

Greece: "Don't blame us"

Only time will tell if Papandreou's October surprise would have proved successful, said independent economist Vagelis Agapitos.

"If he's a hero, we will not know for many, many years," he said.

If Samaras sticks to his word and supports the bailout, then at least Papandreou will have achieved consensus, perhaps at his own expense.

"He's brought unity — no one wants the referendum," Agapitos said.

http://www.globalpost.com/dispatch/news/regions/europe/111103/greece-prime-minister-george-papandreou-euro-zone-referendum-debt-crisis