In practice, the two or three months of uncertainty that will result, before any referendum can take place, look like being a Greek revenge upon the rest of the Eurozone. The fact is that the markets will most likely deliver a verdict long before the Greek people are able to. It is an astonishingly high stakes gamble for the Greek government, and it is a gamble that could drag other countries beyond the point of no return, and they too fight to restore liquidity and in some cases, solvency.
It may well be that Mr. Papandreou can win a referendum, but he may also face the collapse of his PSOK party, as certain defections today seem to hint. The breakdown of the Greek government at this critical time would render the terms of the rescue plan currently under discussion rather academic, and even as it stands, the terms are not as stiff as the markets would like.
The problem now is time. The Spanish government is facing a comprehensive defeat in the general election scheduled for 20th November, so new ministers will be coming into office in Madrid. The Italian government is on the brink of a major change, as Silvio Berlusconi finally runs out of road in his legal and political battles. In France, President Sarkozy faces an uphill battle to gain re-election in May 2012. Even the German government is facing a trouncing in a run of local elections, that will limit their options even before the Federal election in 2013. The fact is that the window of opportunity for a deal to be agreed and to stick is going to be be lost as the political calender increases uncertainty.
The risk is now that Greece becomes a side show as the crisis spreads to Portugal, Spain and Italy. The markets certainly see the risk, and the next few days will see both the EU finance ministers and the ECB attempting to bolster the markets as far as they can. In fact they will be trying to make the best of a very bad job.
The Euro which only yesterday seemed to be on the brink of muddling through, is now facing a further cycle of uncertainty and pressure. The risk of a chaotic end-game has increased. The telephone wires across the continent are going to be hot tonight as very worried European leaders seek to consult.
If Mr. Papandreou loses his gamble, Greece will leave the Eurozone- and they may not be the last country to do so.