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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
Updated with new information on Greek referendum.
NEW YORK (
TheStreet) -- Greek Prime Minister George Papandreou has rejected pressures to resign, but officials close to the leader expect him to scrap plans for a national referendum on the European bailout for Athens' finances. Sadly, Socialists inside the fragile governing coalition and Continental political elites decided democratic decision making is a threat to their designs for One Europe. Democracy be damned!
Papandreou's concession came after Socialist Finance Minister Evangelos Venizelos split with the coalition raising the likelihood a vote of no confidence would succeed. And President Nicolas Sarkozy, Chancellor Angela Merkel and other leaders publically challenged Papandreou to unconditionally accept the bailout. They see a referendum threatening their cherished euro. This false obsession with a single currency places at great peril the
welfare of Greek people and their democracy.
The bailout plan would cut in half the privately held Greek sovereign debt. However, to receive this concession and other aid from richer EU governments, Greeks must accept draconian austerity measures. These would further drive up unemployment and shrink Greece's economy and tax base at an alarming pace, placing in jeopardy eventual repayment of Athens' remaining debt.
Ultimately, Greeks would face reductions in their standards of living upwards to 50%, perhaps more, to generate the exports necessary to pay off foreign creditors. If everything goes as planned, Athens will still be saddled with a debt that is 120% of their GDP a decade from now.
Everything hardly ever goes exactly as planned, and 120% of GDP is an amount most economists believe is unworkable. Hence, the Greeks may bleed a lot for no real purpose than to sustain a failed experiment in a single currency, and the odds are steep against the plan succeeding. Greece's finances could easily be in disarray again within a year or two -- perhaps sooner if the economic meltdown imposed by austerity snowballs.
The Greek people should be given the opportunity to vote on taking such a gamble, and their fate should not be left to leaders far beyond their borders and who they did not elect.
It is convenient for Europeans to blame the Greek mess on a government and citizens who deluded themselves into believing they could live beyond their means -- forever -- but the eurozone was fundamentally flawed from the start. It lacked the common fiscal institutions needed to somewhat equalize the social safety net across its participants.