Greek and international media cover the statements of the new Greek Prime Minister Lucas Papademos , centre, outside the presidential palace in Athens, Thursday, Nov. 10, 2011. Papademos was named Thursday as the prime minister of the new Greek interim government, charged with keeping the debt-strapped country out of bankruptcy and firmly in the 17-nation eurozone. After four days of intense political negotiations, the 64-year-old former vice president of the European Central Bank was chosen to lead a coalition backed by both the governing Socialists and opposition conservatives that will operate until early elections in February. (AP Photo/Thanassis Stavrakis)
Greeks, Europeans, and anyone else who knew the score breathed a huge sigh of relief at the news that Loukas Papademos, the former deputy head of the European Central Bank, will be Greece’s new prime minister. His appointment, especially compared with some of the other names that were bandied about during the past few days as candidates for the post, is the best one could have hoped for if—at least if one believes that Greece belongs in the eurozone and that an exit from it, which became an ominously fashionable topic of discussion among Europe’s leaders the last few days, would be a disaster not only for Greece but for the whole euro project.
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.