Is Athens ready to quit the zone?

Steven Erlanger November 3, 2011

Opinion

Mr Papandreou's decision to press for a referendum on the bailout was the inevitable result of Greece's loss of sovereignty to Brussels and the IMF. Photo: Reuters

THE crisis of the euro zone has finally hit the potholed road of real politics, with the Greeks now openly questioning whether their commitment to Europe and its single currency still matters more to them than control over their own future and economic well-being.

During the two-year financial crisis, the wealthier countries of northern Europe, led by Germany, have insisted that their heavily indebted brethren in the south radically cut spending in return for emergency loans. They have stuck to that prescription even though austerity has undermined growth and increased unemployment in Greece, Spain, Portugal and now Italy, betting that people in those countries would swallow the harsh medicine because their only alternative is to default and possibly leave the euro zone altogether.

The turmoil in the government of Prime Minister George Papandreou means that Greece is about to call that bet. Many Greek politicians appear to be calculating, at this late stage, that they have more to lose by sticking to Germany's terms than by risking a messy default, and even going it alone with their old currency, the drachma, outside the euro zone.

Austerity, in other words, is facing its first really big political test.

Mr Papandreou's decision to press for a popular referendum on the bailout was the inevitable result of Greece's loss of sovereignty to Brussels and the International Monetary Fund.

A Greek rejection of the deal could at the very least put new pressure on the European Central Bank to continue to prop up heavily indebted nations by buying their debt or even becoming a lender of last resort, like the US Federal Reserve. That is a step that is anathema to Germans, who see it as violating European treaties to benefit irresponsible nations. But treaties can be changed, and French President Nicolas Sarkozy still considers the bank to be the best answer to the problem of how to set up a firewall to protect the vulnerable as they try to fix themselves.

NEW YORK TIMES

Is Athens ready to quit the zone?