It's becoming clearer. His shock proposal for a referendum - kept from his European partners - was actually designed for his domestic audience. And it seems to have worked. Today, Papandreou's conservative opposition dropped their objection to the austerity agreement held last week, because it became clear Greece's very participation in the euro was now at stake. A parliamentary confidence motion could therefore be won decisively by Papandreo - and a referendum actually averted. From the FT's must-read liveblog:
Over in Athens, the narrative of today’s developments is becoming clearer. According to the prime minister’s comments to his cabinet, the key turning point appears to have been when Antonis Samaras, the conservative opposition leader, said today that he would be willing to back the new bail-out agreement in order to ensure Greece stays in the euro.
The conservatives opposed Greece’s previous bail-out on the grounds that harsh austerity would deepen the country’s recession and leave banks without liquidity to fund investment. Kerin Hope has more from the text of Papandreou’s address to minister at their emergency meeting earlier: “There is no need for a referendum following the conservative opposition’s switch of its position and willingness to back the October 26 package.”
“We must hail the fact that [the main opposition party] New Democracy will vote for the new bail-out agreement.” “We had a dilemma: consensus or a referendum … Failure to back the package would mean the beginning of our departure from the euro. But if we have consensus, then we don’t need a referendum.”
We may have under-estimated the Greek prime minister's political skills.