Which way will Greece vote?

The Greek prime minister George Papandreou sprang a Halloween horror on the markets last night when he announced a national referendum to decide whether his country will accept the terms of the bailout deal agreed in Brussels last week.

So why would Greek voters decide to reject the deal?

Here’s some possible reasons:

• Public sector wages have been cut by 15%. An additional 20% cut is in the pipeline.
• Wages of employees of state-owned enterprises have been cut by 30%. A further 20% cut is due in 2011-12.
• Pensions in the public and private sector have been cut by 10%. An additional 4% reduction is coming.
• 70% of public sector contract employees, around 85,000, have been made redundant.
• Total public sector employment has been cut by 10%.
• Spending on pensions, illness and drugs has been reduced by EUR3.4bn, 1.5% of GDP.

Holger Schmieding of Germany’s Berenberg Bank estimates that this is “the harshest austerity programme in a Western economy in the last 60 years”.

If this is supposed to be a bailout, there has to be a very high chance that the Greek people will reject it.

Of course, one can, with some justification, argue that the pain would be even worse for the Greek people without the EU/IMF assistance and all the austerity conditions being imposed.

But plebiscites are dangerous and unpredictable things. People don’t always vote on the question asked of them. Often they vote simply to punish incumbent governments, regardless of the potential consequences. That’s why many people don’t feel they are a sensible way, in normal times, to decide policy. That can be argued back and forth. But would anyone seriously argue that a plebiscite is an appropriate way to decide policy in the midst of all the pain, anger and fear of a raging economic crisis?

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