While it would have been naive to believe the latest eurozone bailout plan to be the "comprehensive solution" that EU leaders initially promised, it might reasonably have been expected to last more than a week. But worse even than the agreement unravelling so soon is the manner of its undoing.
Justifications of the Greek Prime Minister's call for a referendum on last week's deal largely focus on questions of legitimacy. George Papandreou claims that a ballot will shore up his government's failing mandate, calm the increasingly violent protests sweeping the country, and give citizens the opportunity to back the foundation of "a new Greece". Were the issue one of Greece alone, such a case might just stand up. But it is not. Mr Papandreou's move will make waves across the eurozone and beyond. Coming as it does, undiscussed and unheralded, within days of a supposed agreement, it smacks of shameful bad faith.
The immediate impact is serious enough. World stock markets are once again in freefall; the cost of Italian debt – a barometer of future fears – is spiralling upwards. Perhaps more damaging still is the mockery that Mr Papandreou's actions make of EU deal-making. The Greek Prime Minister made no mention of a referendum at last week's pair of emergency summits, and dropped his political bombshell with no warning to his European counterparts. Eurozone negotiation – already a fraught and distrusted affair – has suffered a credibility hit that the bloc can ill afford.
On the matter of the referendum itself, the expectations are more disturbing still. The best-case scenario is that the intervening period is spent fine-tuning the details of the bailout plan, easing the burden on the Greek people sufficiently to secure a "Yes". At the other end of the spectrum, voters may prove implacable. The fallout from a "No" vote is difficult to quantify, ranging from a return to the negotiating table over Greek debts (with all the implications for other eurozone taxpayers), to the catastrophe of a disorderly exit from the euro altogether. Much will depend on how the question is framed. A "No" to honouring the country's debts is one thing, a "No" to remaining in the eurozone quite another.
All of which illuminates the most corrosive effect of Mr Papandreou's irresponsibility. With any referendum unlikely to take place until January, Europe now faces weeks of uncertainty. Most immediately, efforts at this week's G20 meeting to hammer out details of the upgraded "big bazooka" bailout fund will be undermined, likely provoking further upheavals in financial markets. More broadly, continuing instability will both increase the pressure on an already tottering Italy and add to the risk premium inhibiting bank lending and stifling economic activity across the Continent.
Vague statements from EU leaders yesterday only highlighted their impotence, as did the British Government's feeble call for Greece to stand by last week's deal. And it is hard to see how the emergency meeting between Greece, other eurozone leaders and the IMF, hastily convened for later this week, can put the genie back in the bottle.
That is bad news for Greece, bad news for Europe, and bad news for Britain. Yesterday's better than expected growth figures would never have been a genuine cause for optimism, given the skewed comparison with one-off depressive effects, such as the Royal Wedding, in the previous quarter. The sharp dip in the manufacturing sector last month already heralds economic drag to come. But that was before the latest turmoil in the eurozone. Mr Papandreou's ill-considered referendum has made a bad situation far worse.
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