The Greek plan to hold a referendum on debt re-structuring seems highly risky, but there is an internal logic to the plan.
A gamble Greece can't afford to lose
George Papandreou, the Greek prime minister, has chosen to lead from behind. He declared on Monday that the Greek people will be asked by referendum to accept or reject the latest financial bailout scheme offered by European and global financial institutions.
Bank shares were hit hard as stock markets declined. The euro fell. A German lawmaker said he felt "irritated". Greece's finance minister was hospitalised for stomach pain. And the world was reminded that the word "catastrophe" - like "democracy"- comes from Greece.
On Friday European leaders approved a bailout plan promising Greece $184 billion in additional funding to cover its borrowing needs, and lenders agreed to accept a 50 per cent markdown on their loans. But the package also required more international oversight, cuts in government spending and increased tax revenue, at the expense of the 10.7 million Greeks. Opinion polls show 59 per cent of them oppose the package.
Mr Papandreou's choice of a referendum, within a few weeks, has its artful logic. With elections two years away, he seems to have time to be courageous. But his party stood at just 14.7 per cent in the latest opinion poll. The top opposition party - which has called, astonishingly, for easier bailout terms - stands at just 22 per cent. Mr Papandreou is clearly unwilling to soldier on alone while the opposition snipes from the sidelines.
A referendum "no" vote would at least clarify the situation, while a "yes" would put political responsibility for the subsequent austerity onto the broad shoulders of the public. That result would leave Mr Papandreou in a good position. He may, however, be underestimating the damaging divisiveness that referendums can create.
Greeks now face sobering contemplation of their looming Pandora's Box. A "no" vote could well mean departure from the euro zone, possibly even from the European Union. With luck the public will come to its senses: are rural voters, for example, ready to risk the loss of their billions of euros in EU farm subsidies?
But Mr Papandreou's move also drags the whole world deeper into his crisis. At best we can expect a nervous few weeks for the banks that have just lost their assurance of recovering 50 per cent of their capital. The Greek premier, in other words, is gambling with the global economy.