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Papandreou Will Step Down in Greece

Greek Prime Minister George Papandreou at Cabinet Meeting, Nov.1, 2011 (photo: Prime Minister of Greece)

Let’s get up to speed on the latest out of Greece. When we last left things, Prime Minister George Papandreou’s tenure hung in the balance of a confidence vote on Friday. He survived the confidence vote, but only after agreeing to negotiations that will end his term as leader today.

The negotiations have wrapped up, with Papandreou and opposition leader Antonis Samaras agreeing on a national unity government that will approve the bailout deal, which will provide billions of euros from the EU, European Central Bank and the IMF, and a haircut on Greek debt for creditors of up to 50%, in exchange for another round of austerity measures. Who will lead the new government is unclear except for the fact that it will not be Papandreou; the determination of the new Prime Minister will be the result of further talks tomorrow. It’s also unclear how long this unity government will last.

What we do know is this: Greece has lost whatever remained of their sovereignty.

The European Union gave Greece 24 hours on Sunday to explain how it will form a unity government to enact a bailout agreement.

Papandreou and his opponents have been scrambling to hammer out a deal ahead of a meeting by finance ministers of euro countries on Monday, to show that Greece is serious about taking steps needed to stave off bankruptcy.

Basically, the IMF demanded consensus from every single party in Greece on austerity measures, which the opposition center-right party had been opposing in votes. Once Antonis Samaras agreed, the troika (IMF, EU and ECB) demanded a “unity government” that would ram through the austerity measures without votes of the people taking place. [cont’d.]

So European leaders wanted two things: approval of the bailout terms, and no uncertainty by way of a vote of the people until those terms were set. And they got precisely what they wanted. One socialist party member told Greek state television that “Everything must be wrapped up within the day otherwise tomorrow it will be hell.” Democracy was nice in Greece while it lasted for a few thousand years.

This does not totally mean that the bailout is a done deal in Greece. A German tourist company wants hoteliers in Greece to specifically spell out how they would be paid if Greece leaves the euro. So many are hedging their bets. But the likely outcome of the weekend’s dramatic events is that Greece will accept the bailout and austerity terms. And the consequences for the Greek economy are sure to be disastrous:

The tiny jewelry shop in the working-class Athens neighborhood was open for business — barely.

The shop’s proprietor, Tasos (he preferred not to disclose his last name), has not had a sale in more than three months. Because he cannot afford to pay his electricity bills, there was no light to illuminate his storefront display of jewels […]

The effect on his small business — which he says may have to close — has been devastating. His regular customers, whom he rarely sees these days, owe him €14,000, or $19,300, and those that he does see are looking to pawn their family heirlooms to get by.

“The politicians are playing games with the people,” he said, his eyes red with exhaustion and stress. “This city is boiling. I am not a protester, but soon the top on the kettle will pop.”

That the Greek economy is in a downward spiral from a relentless program of austerity is well known. Greek manufacturing saw one of its sharpest falls ever in October, and this year overall production is expected to contract by more than 6 percent. What has not yet shown up in the official figures, though, is the extent to which the crisis atmosphere has brought the economy to a virtual standstill.

Read the whole thing. To which I reply: of course! The country has decimated public sector spending – Greece is running a primary budget surplus at the moment – in the middle of a depression, and the logical outcome of that is an absolute crumbling of the economy. Nobody has any money in Greece, and the government isn’t providing any demand – in fact, they’re taking demand away.

If you want to know the plan that the Pete Petersons of the world have for this country, just look over at balanced-budget Greece.

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David Dayen

David Dayen