Whether or not it was a good decision, the Greek lawmakers that followed the PASOK party line and voted for the latest austerity plan in order to qualify for the debt bailout showed some real courage. Voting in favor of this terribly unpopular measure in an environment of strikes and riots can not have been an easy decision. However, now their political leader and Prime Minister George Papandreou has literally cut the legs out from under them by calling for a national referendum on the latest austerity plan.
It is impossible to determine what the consequences of this action will be, but I don't think the crashing financial markets are over reacting to the mess that Papandreou has created. The Greek economy is in such difficult shape that the suicide rate is already up 40%. The new uncertainty caused by Papandreau about Greece's economic future is likely to make things even worse.
It seemed unlikely to me that anyone it the world could possibly do anything this week that was even more moronic than Jon Corzine, but Papandreou wins. For those of you that have not been following the MF Global debacle, Corzine made huge and wildly speculative bets that buying the sovereign debt of European countries would be a good investment.
It is not a huge surprise given the turmoil in Europe that investors have bid up the price of U.S. issued debt as they look for a safe haven. However, I have to wonder if that is not a case of leaping from the frying pan into the fire. Is the U.S debt really a safe haven given that a U.S debt crisis will be upon us sooner than most people think?