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.
More importantly, EU institutions are ill-equipped to deal with the fact that common currency across widely diverse economic regions and political jurisdictions will be overvalued for some -- as in Greece, Italy, Spain and Portugal -- and undervalued for others -- like Germany. This makes the latter hypercompetitive, and leaves the former with chronic trade deficits, shortages of currency, the need to borrow, and eventually the crises these nations face today. The bailout plan is a giant band aid for a failed euro and the mistaken belief that a common currency is necessary for a united Europe. The EU was making very good progress toward an integrated continental market and greater political and cultural cohesion before the euro. The euro has become a symbol without a purpose -- indeed a symbol with a destructive end. Greeks should be given the option of staying in the EU but dropping the euro --essentially the status the UK enjoys. By readopting the drachma, remarking sovereign and private debt to the reinstituted national currency, and letting the value of the drachma fall to levels consistent with a trade surplus that permits Greece to service its debts, Greece's economy would begin growing again, and many of Greece's army of unemployed would be put back to work. With a reinstituted drachma, foreign creditors would receive payments on Greek debt less than they are currently owed as stated in euro. However, with the Greek economy more fully employed and generating exports, the haircut a reinstituted drachma would impose would be far less than will ultimately occur though the mindless austerity now imposed. Breaking ranks with the government, Venizelos stated "Greece's place in the euro is a historical conquest by the Greek people that cannot be placed in question... this cannot be made dependent on a referendum." That thinking is backwards. The Greeks should accept the bailout and continue in the euro only if they determine the currency serves them well. As currently constituted, a single currency may serve the One Europe designs of France and Germany, but make Greece and the other Mediterranean states nothing more than the victims of a northern conquest.
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