Both the Germans and the Greeks know this. The Germans (mainly) hold the purse strings, but they don't hold all the cards. They may push the Greek government into austerity programs in order to extract greater savings and fewer euros in the rescue package, but the Greeks also know that they can cause the eurozone to collapse.
So they play a game of chicken.
It is therefore with interest that in the latest round, Greek Finance Minister Evangelos Venizelos took the unusual step of released a statement about the conference call with the Troika which by describing Greece as being "blackmailed and humiliated" [emphasis added]:
If we want to stabilize the situation, avoid default, always be within the Euro Area’s hard core, have the country stop being blackmailed and humiliated –because no Greek citizen must tolerate the country’s humiliation- then we have to make three grand strategic choices which constitute our national strategy:
[blah, blah, blah...]
This is a situation that leads to nowhere. The governmental committee formulated today a clear framework which will guide me tomorrow during my teleconference call with the representatives of the Troika, the European Commission, the International Monetary Fund and the European Central Bank, aiming at coming to an agreement on the fact that we need to meet our fiscal targets for 2011, to formulate a 2012 State Budget that leads to primary surpluses and to show that we have made progress and that we will take even faster and more determined steps in the field of structural changes like those announced by the Cabinet in its September 6 session.
At the about same time, Prime Minister Papandreou floated the trial balloon about holding a referendum about whether Greece should stay in the euro [emphasis added]:
As pressure from Greece’s foreign creditors and austerity-weary citizens mounts on the government, Prime Minister George Papandreou is considering calling for a referendum on whether Greece should continue to tackle its debt crisis within the eurozone or by exiting the single currency.The Greeks are playing "chicken". If the situation wasn't so serious it would be amusing.
According to sources, Papandreou hopes that the outcome of such a vote would constitute a fresh mandate for his Socialist government to continue with an austerity drive backed by Greece’s international lenders -- the European Commission, the European Central Bank and the International Monetary Fund.
A bill submitted in Parliament, paving the way for a referendum to be carried out, is to be discussed in coming days.
Addendum: I see that the Greeks have denied the rumors of a referendum, but isn't this the kind of trial balloon that you would want to float if you were to play chicken?
Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
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