Greek Prime Minister George Papandreou meets Greek President Karolos Papoulias at the Presidential Mansion in Athens, Greece on November 5, 2011. (J Liakos/Rex Features via AP Images)
After a weekend of intense haggling, sharp public statements, and hope trading places with despair every other hour or so, Greece is set for its first coalition government in 22 years. Last night, a little after ten o'clock, the office of the president of the republic released a short statement announcing that Prime Minister George Papandreou, leader of the left-wing PASOK Party, and the leader of the conservative opposition party, the Nea Demokratia, Antonis Samaras, had agreed to form a new, interim government with the purpose of implementing the bailout agreement reached at the October 26 European Union Summit. Afterward, the country will hold new elections.
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.
We have seen this play before. It was the summit to end all summits, the one that would offer a decisive solution to Europe’s Hydra-like sovereign-debt and banking crisis. Once again, there were intense pre-negotiations, op-ed exhortations, and breathless anonymous briefings. This time, reaching a resolution took two EU summits in the space of four days—the last one, on Wednesday, lasted into the wee hours of Thursday. And once again, victory, in the form of a deal, was snatched at the last minute from the jaws of defeat, setting off triumphalism in European capitals and a buying frenzy in world markets.
The much-heralded solution to the European debt crisis has been replaced -- quickly -- by a new impetus to dissolution. Less than two months ago, European officials were all abuzz with excitement about the July 21 EU pact, through which Greece would get its second bailout. The private sector (i.e., the banks) would take some losses on Greek bonds, but not in a way that would activate credit-default swap payments. The EFSF, the European Financial Stability Fund, would be allowed to buy bonds of troubled Eurozone countries in the secondary market so that the European Central Bank would no longer have to.
The Germans were happy enough. The banks -- and the Central Bank -- were happy enough. The Greeks were just plain happy. Little did they know.
(AP Photo/Geert Vanden Wijngaert) European Union Commissioner for Economic and Monetary Affairs Ollie Rehn
On Monday, Ollie Rehn, the dough-faced Finn who serves as the European Union economic and monetary affairs commissioner, briefed the European Parliament on the latest bad news about Europe's economy. Second-quarter growth fell to 0.2 percent in the Eurozone as a whole (compared to 0.8 percent in the first quarter). German quarter-to-quarter growth tumbled down from 1.3 percent to 0.1 percent. France's fell to zero. Eurozone manufacturing output contracted in August.