By Dave Anderson:
From Reuters, the reaction to the Greek decision to actually put the future of their country into the voters' hands si one of shock. The Greek public will be asked whether they approve of the conditions (long term austerity) for the next round of bail-out funds from the EU, ECB and IMF.
Greece's shock decision to hold a referendum on its euro zone bail-out package sent investors scurrying for safer investments on Tuesday, hammering stocks and punishing the euro...
Greek Prime Minister George Papandreou's announcement on Monday that he will put Greece's bail-out to a referendum immediately cast doubt on the euro zone's plan to hand Athens 130 billion euros and arrange a 50-percent write-down on its huge debt. It raised the possibility of a disorderly default on its debt if Greeks vote against the plan.
The entire point of bailing out Greece is to save the Euro zone and more importantly, to save the French and German banks from recognizing their losses on Greek debt. Greece staying in the Euro zone is basically a case of Greece creating positive externalities for everyone else while the Greeks continue to get kicked in the balls.
If I was a Greek voter, I would vote against another decade of austerity in order to save foreign bankers who failed in their basic job of accurately assessing risk of borrowers. Yes, a "NO" vote means devaluation and default, and probable secondary bank runs in Greece's major trading partners, but the possibility of seeing per-capita income return to its 2007 values by 2016 is well worth the risk compared to be a kicked prostrate dog.