Life after Grexit: Referendum opens path to freedom

AS AN American politician said, "It's déjà vu all over again." Exactly four years ago, on June 28, 2011, I published an article urging George Papandreou, then prime minister, to hold a referendum to ask the Greek people if they wanted to remain in the euro. "Not every creditor deserves a break," I wrote. "They should have known it was risky to lend to Greece. Let them bear the cost."

At end-October 2011, Mr Papandreou announced his intention to hold a referendum on Dec 4, but was talked out of it by German Chancellor Angela Merkel and then French president Nicolas Sarkozy. He lost the subsequent election. His party, Pasok, never recovered. Four months ago, I recounted this story in the OMFIF March Bulletin, when I urged the new party in power, Syriza, to hold a referendum. "Like Papandreou, but with still greater urgency, Syriza can go back to the citizens," I stated. "The government has to say, 'We thought it would be easy to defy austerity. But we have found out that is not so. If we are to fulfil our promise to you, we have to carry out Grexit'."

Greek Prime Minister Alexis Tsipras has called a referendum and the creditors have withdrawn their offer. The European Central Bank is freezing credit to Greek banks. Greek depositors are withdrawing money at alarming rates. Banks will be closed for an indefinite period and capital controls imposed. Technically nothing has changed. In real life, everything has.