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Tuesday 1st November 2011 | 12:01
Over the past 24 hours, markets have quaked with the announcement by the Greek government of a referendum on the eurozone deal. They seem right to do so: a poll by the newspaper To Vima showed that nearly 60% of Greeks regarded the deal as ‘negative’ or ‘probably negative’ and nearly two thirds felt ‘unease’, ‘fear’ or ‘rage’ at the decisions reached.
Through months of protests and anger at their politicians, the Greek public have been without a chance to vent at the ballot box. This contrasts with the Irish, who embraced the opportunity to sweep Fianna Fail from power, or, to a less dramatic extent, the Portuguese.
The advantage of this approach is that a fresh government has a mandate to deal with the issues in the national in-tray, however difficult. There is a certain maturity as well as self-interest to the Greek opposition leader Antonis Samaras’ call for a snap election instead of a referendum on the eurozone deal alone.
In the current climate, it is difficult to imagine how the Greek public would do anything other than lash out at the deal if it came to a vote; a situation which would leave the rest of the continent staring into the abyss, without a Greek government able to make good on their promises. The short-lived uncertainty of an election seems far preferable.
But, in fact, does anyone believe in the deal reached last week? Was the rally on the markets a display of optimism, naivety or even denial?
Our poll on the deal, conducted at the end of last week among 330 city figures, in conjunction with CityAM, shows the profound level of scepticism.
Respondents differed in their attitudes towards three prongs of the deal taken independently of each other, and felt positively indifferent towards the idea of a 50% haircut on the value of Greek bonds (seen by Fitch and others as tantamount to default).
When taken as a whole, however, the city slammed the agreement, with just 24% expressing even a modicum a confidence in it and 65% seeing themselves as sceptical, including 18% ‘completely sceptical’. As fielding took place in the 48 hours following the deal, long before the Greek referendum wheeze was announced, none of this bodes well.
But this isn’t really about Greece.
When we asked the City which eurozone economy worried them the most, half stated Italy, with just a quarter citing Greece. The possibility of an Italian default is the elephant in the room (perhaps an elephant with metaphorical nuclear bombs strapped to it, for good measure). As we reported earlier in the year, the City is very doubtful as to whether a large enough fund could ever be put together to bail out the eurozone's third largest economy.
Furthermore, our poll revealed nothing but contempt for the way in which Silvio Berlusconi had handled the talks, with just 6% voicing any approval. The embattled and belligerent Nicolas Sarkozy fares only slightly better.
None of this is very encouraging.