European leaders Angela Merkel and Nicolas Sarkozy may well pretend that the Greek debt crisis is over but in fact nothing could be father from the truth. By browbeating and publicly humiliating Greek President George Papandreou, Germany's Angela Merkel and French President Sarkozy obtained the withdrawal of the referendum on the October 27 Euro-zone bailout package. But their action only prompted further instability in the Greek government by splitting the Cabinet in two.
While Mr. Papandreou obtained a vote of confidence in Parliament his leadership is under question with the opposition conservatives calling for immediate elections. What effect this is likely to have will become apparent when markets re-open on Monday. With a scheduled meeting of Finance Ministers to discuss the next tranche of money to be paid to the Greeks, there is likely to be tremendous volatility on European bourses on Monday and Tuesday. At stake is the fate of Greece's €130-billion bailout, agreed to by euro-zone leaders to keep Athens afloat and restore confidence on global financial markets.
The wrangling in Athens has resulted in a deadlock that could push Greece closer to bankruptcy, total default and an exit from the Euro-zone itself. However, there is a catch. No treaty provision exists for a country to withdraw from the European Monetary Union and Greece will in all probability have to first withdraw from the EU, then re-apply for membership without joining the Euro.
Greece has just enough money in the bank to tide over the next five weeks. Mr. Papandreou would like to see a government of national unity that would last the remaining three years of the present legislature. But Antonis Samaras, leader of the Conservative opposition has rejected this outright and called for a snap election.
More headaches are on the way. Italy's Silvio Berlusconi faces a no-confidence vote in Parliament which, political observers say, he is bound to lose because of large-scale defections from his ranks. With Greece and Italy in the grip of political uncertainty the Euro-zone boat could be severely rocked in the week to come.