Referendum or not, Greece is obliged to continue enforcing the second austerity package that the Athens parliament voted for on 20 October. But is this possible or is the country bound rather sooner than later to go bankrupt the hard way? Let's see what answers can be given to those burning questions ahead of the G20 meeting in Cannes on the evening of 2 November.
It goes without saying that whatever government will be ruling the country over the next few months, it has at least to try applying some kind of tough austerity programme, otherwise Athens will default.
Incidentally Greece has not yet received the €8 billion sixth loan tranche despite it being approved by the EU and the IMF. Obviously, the announcement of a referendum makes its release even more complicated. In December, Athens is also expecting the seventh loan installment of €5 billion. If those EU-ECB-IMF soft loans are not released, Greece will go bankrupt within hours.
The release of both loan tranches hinges, however, on Athens applying the new austerity programme that its parliament approved, irrespective of what the referendum result might be or if the Papandreou government will live up to it.
Greece's short-term problems also include the refinancing of government bills that expire in November and December, a total of €7.5 billion – seemingly no investor will now risk their money to refinance those three-month Greek state IOUs, so the Eurozone will probably have to take care of that as well. But will it be possible to convince German taxpayers to go on financing Greece, until Athens resolves its democratic and 'philosophical' pursuits?
Would it be an exaggeration to say that Athens in reality holds the keys of the world financial markets' basic equilibrium, so some kind of government is needed there to make sure that those keys are not lost?
And the question that naturally arise is if this government will able to continue governing, with a confidence vote pending in the national assembly on 4 November and European/world leaders waiting for Papandreou to convince them that his decision to hold a referendum is best for Greece and Eurozone.
Meanwhile, the country's long-term financial status is also in a dreadful stage. The target for a fiscal deficit of 7.8% of the GNP will be missed this year, with the gap likely to reach 9% or even more. Last year, the 2010 deficit was 10.8% of GNP, while the new package agreed by the 17 Eurozone leaders for Greece on 26 October demands that, after the 'haircut' of the country's sovereign debt by 50%, Greece must reach a sustainable level in its fiscal deficit of 2.9% of GNP by the end of 2014.
To attain this, the European Commission estimates that Greece has to come up with savings of 20% of GNP from now until the end of 2014, or a round sum of €45bn. During this period the same Commission report states that Athens also has to realise privatisations of €35bn and, along with the returns of €15bn from the Helios solar-energy project, the country must come up with €100bn in savings and new receipts from now to the end of 2014.
These will be the guidelines for Greece's own contribution in the multi-year programme to be decided in detail by this December and be voted or rejected in the referendum, if one is ever held.
In any case, these are the main points of the overall agreement struck between Papandreou and the EU-ECB-IMF troika during the late hours of 26 October. The motto for this agreement was, as Papandreou told them: “You take care of the debt and I will take care of the deficits."
But it is questionable if the governing Pasok party will support Papandreou in the referendum. At this point, it should be noted that after the Pasok Parliamentary group voted for the last package of measures on 20 October, a large number of deputies told the PM that the party had reached its limits.
The decision for a referendum has increased the pressure on Pasok deputies and already one, Milena Apostolaki, has quit the governing parliamentary group but not the parliament. This means she will vote against the government in the upcoming confidence vote. What if the government falls at the end of this week? Does the Eurozone have a scenario for that, or will the financial world fall apart?
Twist it as one may, Greece has to come up with the €100bn in additional state receipts between now and the end of 2014. Such a project will entail more government-worker lay-offs and state-expenses cuts on top of those already being realised.
The vast majority of citizens, however, is now so angry and lost that citizens have adopted a negative attitude towards the entire established political spectrum, and no parliamentary party or deputy can safely appear in public. Given this political meltdown in Greece, the European Union and more so Berlin and Paris have to reconsider the offer that they made to Athens on 26 October.
The announcement to hold a referendum has sent the world's financial markets into turmoil. So, at Cannes, European and world leaders including George Papandreou have to come up with something and that something has to be an international framework supporting Greece to avoid wild bankruptcy, at least until the referendum is held, if the developed world wants to avoid a new and more devastating credit melt down.
Not to forget that at the beginning of World War II, London, Moscow and New York were praying that Greece held for more months the attacks of the Fascist Axis and latter recognised that if Greece had fallen earlier, history would have been very different.
Now, once again, Greece is in the focus of the entire financial world, where today's battles are fought.
No wonder then that everybody is watching Athens clsoely and trying to drag developments to their benefit. But dragging and pushing things in Athens may send Greece into another long winter, as was the case after World War II, with a devastating civil war that lasted from 1946 until 1949.