Greece’s bailout referendum gambit: grave error or glimpse of greatness?

Toronto Star | Greek Prime Minister George Papandreou’s call for a referendum on a massive bailout package has all but swept away hopes of finally stemming his country’s massive debt crisis.

Now it looks like his own government will be pulled under by the same current.

A man who spent a decade fighting for the prime minister’s post, and whose name carries the resonance of America’s beloved Kennedys in his own country, Papandreou shocked political allies and enemies alike with his call to take the European bailout plan to the voters.

Some see the referendum call as a reckless move by a cornered politician who refuses to shoulder the legacy of brutal cost-cutting measures. Others charge it is a brilliant, gutsy strategy designed to silence his critics and ultimately garner the support the bailout needs to be successful.

Is Papandreou saving his career at the expense of the global economy — or is that the only way to save it?

Now his government is teetering on the verge of collapse. It faces a confidence vote at the end of this week.

Stock markets swooned and European leaders scrambled following Monday night’s Greek bombshell, which threatens to undo 18 months of negotiations by the European Union to ease the debt emergency.

Working deep into the night last week, eurozone countries agreed to a package to cut Greek’s public debt by half and strengthen banks’ balance sheets to guard against a continentwide banking crisis.

“The summit last week was to deal with the uncertainty in the eurozone . . . and this grenade is thrown in just a few short days later,” groused Lucinda Creighton, Ireland’s minister of European affairs.

With the EU deal now in doubt in the fast-moving political situation in Athens, world leaders face the possibility of a disorderly debt default by Greece, which could spread financial chaos to other countries such as Spain and Italy.

That would in turn raise the possibility of another global banking calamity that could prompt a repeat of the 2008 recession. Also at stake is the future of Greece within the EU, the credibility of the euro as a 17-nation currency and, in the worst scenario, the survival of the half-century-old EU itself.

Antonis Samaras, leader of Greece’s opposition New Democracy Party, hissed that his party would never accept “reckless adventurism.”

“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Samaras said.

Papandreou said that he needs wider political backing for deep spending cuts tied to the new €130 billion aid deal.

He wanted Greek voters “to take a position, to see the choice before us in its starkness, hoping they will back the lesser of two evils, instead of letting irate reactions in the streets dominate the debate,” one adviser to the prime minister told The New York Times.