The situation is rapidly degenerating in Greece, in just one day after the surprise announcement of Papandreou indicting a a referendum on the EU bailout we have the following news:
One of Papandreou MPs has left the party and therefore is putting the Government vote of confidence on Friday at risk; voices are spreading of another possible defection bringing Papandreou's Party to a very thin majority.
Venizelos the Finance Minister was hospitalized it seems he found out by the media that Papandreou asked for a referendum, it appears the Greek Prime Minister kept his decision a secret from everyone even his Finance Minister.
The Health Minister has opposed the referendum saying it won't take place in contrast with his Prime Minister.
Papandreou has reshuffled the Army command appointing a new general as the new Chief Commander.
All this sound as full total chaos ready to be unleashed on the nation and the change in the army command could indicate anarchy and military mobilization ready to hit Athens' streets.
And to understand what we canexpect from today's High Stake Greek Gamble read the following From
Zero Hedge:
The decision by Greek PM Papandreou to call for a referendum on the
latest Greek bailout deal shows that Greece is becoming ungovernable.
The PASOK leader made this decision because riots in the streets,
increasing refusal by civil servants to implement the austerity measures
and the likely loss of his majority in parliament made the survival of
the government unlikely within weeks or months.
So Papandreou has gone for broke. He hopes that by winning a vote on
the bailout plan he can shut up the opposition both in parliament and on
the streets. But this high-risk strategy threatens to bring the whole
house of Euro cards down.
At best, we face two months of uncertainty before the vote. The Greek
parliament must approve the call for a referendum and the President
must agree. And then it depends on how the referendum question is
worded. If it is ‘do you want to accept the latest bail out plan’ then
the answer will be a resounding no. If they word it so it says ‘do you
wish to remain in the Euro zone’ then the answer will be a resounding
yes.
At worst, Greece may not even make it to mid- January before there is
a disorderly default. Parliament could defeat a vote of confidence in
the government on Friday and Greece would be plunged into elections,
with the opposition likely to win on a programme of ‘renegotiating’ the
bailout plan so tortuously agreed with the Euro leaders.
Also the latest tranche of official funding from the EU and the IMF
under the old Greek bailout plan could be frozen if the government
falls. Under IMF rules, it cannot disburse a tranche if there is no
government. The EU would have to step up to the plate and provide all
the funding until the election or referendum is over. Without this
money, Greece would be bankrupt.
And
just imagine if Greece heads into two months of a referendum campaign
with riots and demonstrations in the streets. A run on Greek banks —
Argentina-style — would become very likely. It’s true that the rich and
many corporations have already moved their euros abroad, but the
populace at large would soon be running to get their euros under
mattresses fast if they thought that Greece was set to default and leave
the euro.
The Greek public debt ratio may be heading towards 180% of GDP next
year without the bailout plan, but if Greece leaves the Eurozone with a
no-vote in the referendum, a New Drachma devalued by 50% or more would
double that debt ratio.
The optimistic scenario is that the Greek parliament backs the
government and a referendum campaign is conducted on ‘staying in the
euro’, which is won. The Eurozone and the IMF continue to finance the
Greeks over the next two months before the new bailout package takes
over. The 50% haircut for the banks on their holdings of Greek debt goes
through with over 90% involvement; the banks receive funds to
recapitalise; and the EFSF is enhanced with new firepower to inoculate
Portugal, Spain and Italy from the Greek nightmare. And the G20 meeting
comes through with new measures of funding to help Europe.
The more you think about, the less likely that sounds. More likely,
the uncertainty will undermine the efficacy of enhancing the EFSF
through adequate funding from a Special Purpose Vehicle. It will
increase contagion for Italy and Spain, increasing the cost of
ring-fencing. And a disorderly default would trigger losses for the ECB
itself on its holdings of Greek debt.
