John  Browne

When the news broke earlier this week that Greek prime minister George Papandreou would seek a popular referendum on the bailout deal that had been so torturously negotiated over the previous months, financial panic quickly emerged. A "no" vote by the Greek people would likely lead to a partial dissolution of the Eurozone and could be the beginning of the end of the euro currency itself.

As it turns out, Mr. Papandreou's seemingly democratic gesture was more likely a political tactic to lure the opposition conservatives into sharing the political burden of passing the bailout deal. Although many of these conservatives had likely supported the bailout package, they kept their distance due to its extreme unpopularity on the street. They had seemed perfectly content to let all the political heat fall on Papandreou, who no doubt would have fallen when the deal took hold. By calling for the referendum, Papandreou brilliantly forced their hand. Not willing to risk a failure of the deal, and an expulsion from the Eurozone, the conservatives reversed course and publically supported the package. Papandreou then cancelled the phantom plebiscite.    

But the affair should remind us all just how fragile the euro actually remains. In reality many stumbling blocks remain that could force Greece out. As the world's second currency, the euro's collapse would create a massive currency crisis in the European Union, the world's largest economy, possibly triggering a massive depression.

From its inception, the EU grew based largely on deceit, political bribery and corruption. Indeed, its accounts have remained unsigned by its auditors for the past fourteen years. Progressively, it has trampled democracy underfoot. The EU has an elected parliament but, as was the case in the former Soviet Russia, the elected body has no real power.

Whenever nations, such as France, Denmark and Ireland have voted in referendums against EU membership, their votes have been virtually ignored. Many of the main contributing nations, such as Germany and the UK, have been denied a referendum. In the case of Great Britain, the leaders of all three major political parties recently gave election promises of a referendum on continued EU membership. Last week, however, Prime Minister Cameron, who promised a "cast iron guarantee" of a referendum, led the three major party leaders in imposing a three-line whip to stifle a consultative backbench parliamentary vote for a referendum.


John Browne

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.
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