Greece PM Papandreou Wins Vote of Confidence

From the Bloomberg,

Prime Minister George Papandreou won a confidence vote after offering to form a government of national unity that may lead to him stepping down as he sought to reach an accord on European aid needed to avert default.

The premier said he’ll meet with President Karolos Papoulias to discuss his proposal to create a unity government. Main opposition leader Antonis Samaras rejected the offer and called for elections.

“I ask for a vote of confidence tonight so that we can secure the course of this country,” Papandreou said. “I have already communicated with the president of the republic to inform him that I intend to proceed with consultations for a government of cooperation.”

Papandreou’s offer caps a tumultuous week that started with him securing a second bailout from the European Union then roiling markets by unilaterally deciding to put the terms of that rescue to the Greek people in a vote. The premier must heal political divisions to secure agreement on the aid package before Greece runs out of funds next month.

PM Papandreou’s win on a slim margin (153 to 145) only shows how divisive Greek politics has been. The offer by the PM for a conciliatory gesture to ‘step down’ could have been a mawkish bait to garner votes.

And the formation of a ‘Unity government’ whatever that means will likely remain elusive, as the Greece political class seem to have different interests. Nevertheless their common interest is to maintain their privilege of free lunches, the only problem is who and how will these be financed.

The political maneuverings and the bizarre twists manifests of the ongoing political circus in Greece.

I doubt if this political smoke and mirror act will prevent Greece from a default. Yet like almost every political act, this has been meant to buy time.

The Greek Political Circus

Prime Minister George Papandreou surprised everyone with a call for a referendum then suddenly backs out, reportedly out of pressures from the Euro political elites…

From the Daily Mail, (bold emphasis mine)

EU leaders have forced the Greek leader George Papandreou to back down on his promise of a popular vote on the European debt treaty.

So what is it about the EU and referendums?

The Brussels elite positively loathes them - or indeed democracy in general.

But those pesky nation states keep insisting on them. And every now and again they get the wrong answer - voting No to a proposal blessed by the high priests of the EU (Denmark 1992 over Maastricht, Ireland 2001 over the Treaty of Nice, France and the Dutch over the proposed European Constitution, Ireland again over the Treaty of Lisbon).

The standard Brussels response is to demand a second vote, usually after offering a few debatable concessions. That got the Danes off the hook and the Irish twice. More cynically, plans for a European Constitution were dropped after the French and Dutch votes, only to be reincarnated as the Lisbon Treaty (much the same package but a different wrapper).

But this time the European high command has gone a stage further. No sooner had Greek prime minister George Papandreou announced a referendum on the Greek bailout plan - to the shock and fury of the Eurocrats and their allies in the chancelleries of the big European states - France, Germany and Italy all denounced the Greek leader's move as bordering on betrayal

Papandreou had his own internal reasons for proposing a referendum. His main opponents back home in Athens are the New Democrats, who are against the bailout plan because of the tough conditions attached but at the same time want Greece to stay in the euro. Papandreou wanted to force them to face the contradictions of their stance - either to back savage spending cuts bringing rioters onto the streets or to recognise that Greece could not survive in the euro.

He was also looking for a popular mandate - the kind of thing you are meant to do in a democracy - for cuts that slash public sector wages and pensions and to apply pressure to the big powers to offer more favourable terms to Greece.

But New Democracy is that in name only. It was against a referendum, presumably because it saw advantage in perpetual political grandstanding.

With his MPs and Cabinet ministers defecting and Papandreou facing a no-confidence vote, we may well see a new short-term National Unity Coalition government, made up of technocrats not politicians, formed in Athens to do the bidding of Brussels.

Well up to this writing, there has been no coalition government yet.

From the Bloomberg,

Prime Minister George Papandreou struggled to hold on to power after Greece’s largest opposition party rebuffed his overtures to form a national government, raising the prospect of elections that could delay aid needed to prevent default.

Opposition leader Antonis Samaras rejected sharing power with Papandreou and called on the premier to quit. Papandreou, 59, scrapped a referendum on an accord with the European Union to avert a split in his party before a confidence vote scheduled for midnight tonight.

“I never excluded any topic from the discussion, not even my own position,” Papandreou told lawmakers in Parliament. “I am not tied to a particular post. I repeat I am not interested in being re-elected but just in saving the country.”

While the highly fluid developments in Greece remain a potential tinderbox, as shown above, the direction of political actions still seem to emanate from Brussels than from the 'people of Greece'. Plutarchy-Oligarchy over Democracy.

The Swiftly Unfolding Political Drama in Greece

Last week the ECB’s Bazooka deal seems to gotten the financial market upbeat.

Yesterday, positive sentiments suddenly evaporated on the bizarre twist of events unraveling in Greece.

Greek Prime Minister George Papandreou unexpectedly called for a referendum on the Euro bailout measures that heightened the risks of a default. A default could trigger a derivatives meltdown, as well as, jeopardize the recent agreement.

This from Bloomberg,

Greek Prime Minister George Papandreou called a referendum and a parliamentary confidence vote, raising the prospect of derailing the European bailout effort and pushing Greece into default. Stocks and the euro tumbled.

Papandreou’s gambit risks pushing the country into default if rejected by voters, and raises the ante with dissidents in his own party. Papandreou’s popularity has plunged after a raft of austerity measures cut pensions and wages, increased taxes and sparked a wave of social unrest. An opinion poll published Oct. 29 showed most Greeks believe the accord on a new bailout package and a debt writedown is negative.

“Papandreou could lose the referendum, which means that new elections would have to be called,” Thomas Costerg, European economist at Standard Chartered Bank in London, said in an e-mail. “Heightened Greek uncertainty could propagate to other fragile euro-area countries, in particular Italy.”…

Separately, the International Swaps and Derivatives Association said that the euro-area proposals for Greek bonds appear to involve “a voluntary exchange that would not be binding on all holders,” according to an e-mailed statement.

“As such, it does not appear to be likely that the euro zone proposal will trigger payments under existing CDS contracts,” the statement said. “However, whether or not it does so will be decided by the Determinations Committee on the basis of specific facts, if a request is made to them.”

The ISDA statement late yesterday follows a review of whether the proposal would constitute a “credit event” for holders of credit-default swaps linked to the securities.

The deteriorating political events has even led to an abrupt reshuffling of their key military officers.

From the Telegraph,

In a surprise development, Panos Beglitis, Defence Minister, a close confidante of Mr Papandreou, summoned the chiefs of the army, navy and air-force and announced that they were being replaced by other senior officers.

Neither the minister nor any government spokesman offered an explanation for the sudden, sweeping changes, which were scheduled to be considered on November 7 as part of a regular annual review of military leadership retirements and promotions. Usually the annual changes do not affect the entire leadership.

To my perspective, the Greek political drama (or tragedy) has now diffused to the military hierarchy which implies of increased risks of a mutiny or a coup d'état.

Additionally, Papandreou’s grip over the Greek government appears to be crumbling

According to the Business Insider,

Meanwhile, turmoil seethes within Papandreou's ruling PASOK party. One PASOK MP has already resigned over the referendum decision and six more have called for Papandreou's resignation, according to eKathermirini.

The opposition has even stepped up calls for a snap election instead of a referendum where the referendum “was putting Greece's EU membership at risk”.

Again, political events in the Eurozone has been unfolding real fast. Uncertainty clouds the marketplace.