After two tumultuous days, Greek Prime Minister George Papandreou backed off a plan to put the new bailout from the EU and International Monetary Fund up for a referendum vote to be determined by Greek votes after his attempt to bolster support on the home front essentially blew up in his face.
After the EU settled on a new Greek bailout and other areas of concern, Papandreou shocked the EU and even some party loyalists with the announcement on Tuesday that the latest bailout would be put to Greek voters that would likely reject it. However, two days later, the prime minister reversed his decision.
Soon after announcement of the referendum, Germany and France pushed to freeze all financial aid to Greece until after the public vote, which they characterized as a virtual vote to determine whether the nation plans to stay in the EU. Meanwhile, Papandreou saw defections from many of his own party loyalists, leaving him without majority backing for a time. Amid growing calls for his resignation both at home and internationally and preparations for a vote of no confidence designed to oust him from power, the prime minister cancelled the planned referendum.
"The Greece situation, at this point seems to be unending," said Greg Fager of the Institute of International Finance, which has represented the private sector in some EU debt talks.
"We thought everything was put to bed, and then, again, we were dragged right back into it."
Even with the cancellation of the referendum, Papandreou’s political sneak-attack already seems to have had a dramatic negative impact on the EU's attempts to calm markets and foster continued investor activity.
"It just adds so much uncertainty into the financial market," Chmura Economist and Analytics Economist Xiaobing Shuai told NACM.
Ken Goldstein, meanwhile notes, the real question is where the euro is heading as a currence. In his mind, "there is no way to go back to the euro as we've known it for the past decade. Either the euro breaks up or tightens up. And neither is politically popular."
Brian Shappell, NACM staff writer