Papandreou may go ‘within hours or days’

Athens-based newspaper journalist Nick Malkoutzis said: “It is likely this government has hours or days left.”

Mr Malkoutzis, deputy editor of the English language edition of Kathimerini, played down the importance of Mr Papandreou’s decision to call a referendum on the bailout deal – saying he was likely to be forced out before it was held, which would make it null and void.

It is likely this government has hours or days left. Nick Malkoutzis, Kathimerini

“The indications yesterday were that the referendum would take place in January, but it now looks as though we won’t get that far. One of the reasons is that some people may topple him before then. It looks more likely there will be a snap election rather than a referendum.”

Confidence vote

On 4 November, Mr Papandreou faces a confidence vote in parliament, which he risks losing because of his small majority. But Mr Malkoutzis said he may not even make it till then. “It’s quite possible there won’t be a confidence vote. If his ministers turn on him that will be pretty much the end. If they waver, more MPs may quit his party.”

Papandreou's government looks unlikely to survive much longer. A majority of one is no majority at all. The opposition has signalled that it will not proceed with a referendum. Read more from Economics Editor Faisal Islam

Polls

Opinion polls in Greece indicate a hung parliament, with the conservative New Democracy party ahead and Mr Papandreou’s socialist Pasok party way behind. New Democracy’s position on the bailout is that it would seek to renegotiate the terms of the package that has been agreed with the EU and IMF.

But Mr Malkoutzis said most Greeks wanted to remain in the euro. “The general view is that most Greeks don’t see exit from the euro as a viable option, but at the same time they have concerns about what’s on the table.”

At the European summit on 27 October, eurozone leaders agreed a three-pronged deal to bail out heavily indebted Greece. The package includes a 100bn euro programme for Greece, funded by the EU and IMF; a 50 per cent write-off of Greek debt by private creditors; and the recapitalisation of eurozone banks.

Referendum

Professor Iain Begg, from the European Institute at the London School of Economics, said Mr Papandreou was taking a serious gamble with his referendum call, which could result in the country’s ejection from the euro.

“Papandreou believes he can win it, but to others like ourselves it seems extremely risky. From the outside it seems an unnecessary risk to take.”

Prof Begg, who has been called as an expert witness on EU issues by the House of Commons and the European Parliament, said a no vote in the referendum would not mean the end of the single currency, but could lead to Greece leaving the euro.

If the Greek people rejected the bailout package, Mr Papandreou would have to renegotiate the terms with the EU and IMF, but some contributing countries could refuse to accept his demands.

Who is holding whom to ransom? Professor Iain Begg, LSE

“Who is holding whom to ransom? Up to now, the Greeks have been able to say that if we default, it is your fault, not ours. So there’s pressure on the Germans to have done with Greece or risk having a much bigger problem. But the time may come when others say we are going to let you go your own way.

“It would come to the point that Papandreou would have come to the European Council and say my nation doesn’t accept this, so I want the Germans to do more. At this point, others would have had enough. Greece could be ejected from the euro. The danger is that Greece leaves and that causes disruption”

‘Rioting in the streets’

Dawn Holland, an economist at the National Institute of Economic and Social Research, defended Mr Papandreou’s referendum decision, but said it was vital it was held soon.

“I understand why they are having a referendum. It makes sense in a number of ways. The government can make as many promises to the European Commission as it wants, but if it cannot enforce them, people will be rioting in the streets.

“Were the referendum to come out with a favourable result, it would bring market confidence. If there’s a no vote, the proposals on the table are not going to work,so they must come up with a different set of proposals.

“We need to have a programme that people believe in and buy into and so far we don’t have one.The Greeks are paying a big price for these austerity measures the government is promising. We need them to acknowledge that it is the best way forward for their economy.”

Ms Holland said if the single currency came to an end, “there’s no guarantee it would be better for everyone and a significant risk it would be worse”.