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Hey Greeks, no democracy for you!

So now Papandreou has called off the referendum on the austerity package. Floyd Norris remarks: The fundamental nature of European governance is about to change. Either a large part of the Continent will move much closer to a federal government, with common fiscal policies and a substantial loss of sovereignty for many nations, or it […]

So now Papandreou has called off the referendum on the austerity package. Floyd Norris remarks:

The fundamental nature of European governance is about to change.

Either a large part of the Continent will move much closer to a federal government, with common fiscal policies and a substantial loss of sovereignty for many nations, or it will spin apart, with possibly severe economic and financial consequences.

That has been clear for months, and markets have alternately soared and plunged as it appeared Europe was closer to or farther from reaching the first alternative.

This week, it appeared that the prospect that scared European leaders the most was the specter of democracy. When the Greek prime minister, George A. Papandreou, proposed a referendum on whether Greece would go along with the agreement reached at the European summit meeting last week — one that calls for more austerity and that polls say is unpopular with most Greeks — much of Europe reacted with shock and alarm. How dare he do that?

In the end, he could not persuade his own government, and there will be no vote. That should be a cause for sorrow in the rest of Europe, not joy. There is little reason to think that Greek citizens will be more cooperative now that it has been made clear their opinions are irrelevant to the people who run Europe.

Read the whole thing.  In the end, Greece is going to default anyway. Felix Salmon says that Eurozone hubris has invited nemesis that will not stop at Greece’s borders:

Greece is going to default and leave the euro; the only question is when. And when it does, the EU will find that its protections against contagion are about as effective as that $1.6 billion tsunami breakwater in Kamaishi.

Greece can fall and the eurozone can still survive. But Italy — which is just as politically dysfunctional as Greece — can’t. Which is why those Olympian forces will ultimately spell the end not only of Greece’s membership in the euro, but also of European monetary union more generally.

With our five biggest banks holding so many credit-default swaps on European debt, the Atlantic Ocean won’t protect us.

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