Gee, that didn’t take long. Last week’s announcement of a euro zone bailout agreement calmed the markets. Then, Greek Prime Minister George Papandreou’s surprise announcement that he’s putting the agreement to a referendum vote caused markets across the globe to go into the red today.
The Greek government itself may be collapsing under the weight of Papandreou’s decision and the question of whether Greece will remain in the Eurozone is again in play. It’s a high stakes game, particularly as the world leaders gather in Cannes for this week’s G20 summit.
We talked with Matthias Mattijs, a professor of political economy at both The John Hopkins and American Universities. He says it’s important to keep in mind that when it comes to referendum votes, the European Union has a very poor record. He says there are 20 years of data that when issues go to the people, particularly any issues related to European integration, the people say “No.”
And, Matthijs says it’s fair to say this time will be no different. The Greek people will want a better deal. Politically, that’s a win-win for Papandreou. If the Greek voters say yes, then it’s the people’s decision to deal with the austerity and pain. If they say no, Papandreou can go back to France and Germany and say “Listen, my people say no. How can you go against Democracy? What else can you offer us?”
Is it just another case of democracy being incompatible with what the financial system wants? Matthijs says that’s become a pretty common scenario these days. Just look at the markets. It’s pure panic. British, German, and American bonds prices are soaring. And political leaders are panicking as well. German Chancellor Angela Merkel and French President Nicolas Sarkozy have already agreed to hold emergency talks on Greece with the EU, the IMF and Eurozone leaders tomorrow and a separate meeting with the Greek government is planned ahead of the Thursday start of the G-20 summit.
Also on the show today, the Marketplace Daily Pulse got a bit of stimulus today on more evidence that war pays. At least, fake war pays. The video-game maker Electonic Arts said it sold 5 million copies of its new first-person war game, Battlefield. At $60 a pop, that’s economic stimulus.