What will happen with the Greece government?
The Greek Prime Minister, George Papandreou, is the latest casualty in European Debt Crisis, as he agreed today to resign his position in order for Greece to form a “government of national unity.” Mr. Papandreou follows the Prime Ministers of Ireland, Portugal, and Spain who have all either resigned, lost general elections, or announced that they would not run for election again. Of the five PIIGS, only Silvio Berlusconi still remains—as of the writing of this blog post, as rumors of his resignation are filling the European media.
Greece is the only PIIGS where the crisis has reached such a level that politicians plan on creating a government of national unity. Currently, Mr. Papandreou’s PASOK party has a three seat majority in the Greek Parliament. However, this is a very thin majority when politicians are being asked to vote on issues that could hurt the Greek economy for years to come. In fact, when Mr. Papandreou announced that he would call for a referendum, two members of his party announced that they would become independents. While his actions in the last week caused him to lose his job, Mr. Papandreou call for a referendum and then his resignation may in fact have brought long term stability to the country. His antics last week seem to have brought together his center-left PASOK party with the conservative New Democracy Party—in opposition to Papandreou.
Yet, if a government of national unity can be created between PASOK and the New Democracy Party, this could help Greece, as no longer will only PASOK be forced to pay the price for pushing through the legislation required to help Greece weather the crisis. (You can listen to a NPR summary here). Instead, both parties’ hands will now be dirty, and it appears that after the bailout is approved by this new government and its caretaker prime minster, a general election will be called. Then the people can safely voice their opinions on the crisis and who should be punished, but crucially it will be after the bailout has been approved and the markets can relax a little.
As a result, Papandreou’s action may one day receive a more positive view than currently.