So in the end, after three days of hysteria both on the home front and internationally, there will be no referendum on the Greek bailout plan. According to the latest news, which, given developments in the past week, could be rendered obsolete at any minute, Prime Minister George Papandreou has given up on the idea that the Greek people should decide whether the country should accept its new bailout package and, by extension, whether the country should remain in the eurozone. Papandreou is insisting on a vote of confidence in his government, scheduled for midnight Friday; the vote will gauge his level of support among his party. He may end up winning, though it is more likely that he won’t. Papandreou has also authorized negotiations between his own PASOK Party and the main opposition party, the conservative Nea Dimokratia, on the formation of a caretaker government, in the event he loses, whose main task will be to shepherd the new bailout agreement through parliament and then call early elections to set up a new government.
A great deal remains vague and precarious. First of all, there are already reports that the two parties have different conceptions of what their partnership should look like as they usher Greece through the negotiations. PASOK envisages a six-month window during which all the legislative loose ends relating to the new bailout can be tied up. Nea Dimokratia seems to prefer—there has been no official confirmation—a much shorter term for the caretaker government and a more tightly circumscribed mandate: to ratify the new bailout agreement and thus ensure the timely release of the sixth tranche of the original bailout—8 billion euros without which Greece will be forced to default by early December. The rest can be done by a new government.
Assuming Papandreou wins the vote of confidence tomorrow, his role in the new coalition will be a source of friction. In June, when the possibility of a “national salvation” government had first been mooted, he had offered to resign in accordance with conditions set by Nea Dimokratia leader Antonis Samaras, before swiftly backtracking. These days, he seems more stubborn than ever. Loukas Papademos, the much-respected former governor of the Bank of Greece and deputy chief of the European Central Bank, was reported as an extra-parliamentary candidate for caretaker prime minister. The Europeans would be very happy with this, but Papademos, a cautious man with no political experience, has turned down cabinet jobs before, and it is far from certain that he would accept this poisoned chalice.
Complicating matters further is the tirelessly ambitious finance minister and deputy Prime Minister Evangelos Venizelos, who lost out to Papandreou for the leadership of PASOK in 2007 and who was made the effective No. 2 in the government during the June crisis. Venizelos at first strongly supported the referendum, with an aggressive speech in parliament. Then at dawn this morning, upon his return from Cannes where he and the prime minister were told in no uncertain terms what Angela Merkel and Nicolas Sarkozy thought of the referendum initiative, he made a statement opposing it, completely reversing himself. Many thought this was the end for Papandreou, that he would not survive the day. It is unclear whether he did survive because of some kind of a backroom deal with Venizelos (for example, a promise to step aside and allow his rival to lead PASOK into the next general election).
In any event, the emerging consensus between the two major parties on the bailout makes the dreaded prospect of disorderly default more distant—for now. The political fallout, we will know soon enough.