This week’s G20 Summit in Cannes was overwhelmed by the Greek economic crisis, when Prime Minister George Papandreou (who was not invited) threw a huge spanner into the works by stating, while the ink was still drying on the latest bailout plan for the Greek economy, that he would be submitting the agreement to a referendum. In response, the markets took fright, the G20 leaders ran around like headless chickens, and Papandreou was left fighting for his political survival when his finance minister and long-time rival, Evangelos Venizelos, publicly opposed the plans.

As was reported early this morning, the latest news is that, although George Papandreou narrowly won a vote of confidence last night, he “has agreed to step aside to make way for a government ‘of broad acceptance'” that, it seems, will be led by Evangelos Venizelos. As the Guardian explained, “The deal with Venizelos was struck in a desperate bid to avoid snap elections that Papandreou said would be ‘a catastrophe’ for a country on the edge of political and economic collapse.”

Prominent voices call for the return of the drachma

The referendum may have been cancelled, but that doesn’t mean that the huge problems with the bailout deal for which George Papandreou wanted a referendum have been resolved. In the last few days, these problems have, to my surprise, been most eloquently explored in the mainstream media outside Greece in a column for Fox News by Peter Morici, a professor at the Smith School of Business, University of Maryland School, and former chief economist at the US International Trade Commission.

In his column on Thursday, Morici began by explaining that, although the latest bailout plan for Greece involved writing off half of the debt held by private institutions, it also involved a further round of “draconian austerity measures” that will be ruinous for the Greek people, as they will “further drive up unemployment, and shrink Greece’s economy and tax base at an alarming pace, placing in jeopardy eventual repayment of Athens’ remaining debt.” Read the rest of this entry »