The question nobody wants to see asked

European leaders have been stunned by it. Investors are unhappy with it. And Greek politicians are decidedly unsure about whether to proceed with it. Barely a week after the European Union agreed on a ‘comprehensive’ deal to bolster the region’s finances, Greece’s Prime Minister George Papandreou has thrown a massive spanner in the works by calling a referendum on the measures required to bail out his bankrupt country. Markets were thrown by the declaration, with regional bourses tumbling by around 5 per cent in yesterday’s trade. And Papandreou is now en route to meet with his fellow national leaders to explain his baffling move.

Papandreou insists that the referendum will confirm Greece’s ongoing support for the Euro. But that’s hardly a guarantee. Protests in Greece are strong, and Papandreou’s hold on power is wafer-thin. Member of his socialist party have defected, and the opposition is baying for blood. If his government is toppled — a real possibility, especially if parliament fails to approve the referendum — all bets are off. Meanwhile, there is also speculation that within Papandreou’s own party, a leadership challenge is imminent. Even if Papandreou holds on, and a referendum is called, there may still be immediate pain for Greece — the uncertainty could cause the next instalment of bailout funds to be withheld. It is a frightful mess. Just what Europe needs.