5 voices on the Greek crisis

The Greek government is facing enormous pressure to resolve the country’s debt crisis. On Wednesday the finance minister of Greece came out against Prime Minister George Papandreou’s plan for a referendum on the debt deal Europe is offering for Greece. Then Thursday he said he was backing off that plan, saying there is no need for it given opposition support for the tough austerity measures which accompany it. It is not clear if that meant he was canceling the referendum, the announcement of which sparked chaos in the markets.

Leaders of Germany and France have warned that if Greece doesn’t accept the offered arrangement, there would be a nearly simultaneously default, and that Greece would have to leave the euro zone. (Need to understand more about the euro zone? Watch this economist explain)

Papandreou’s office Thursday said he is prepared to enter a national unity government with the opposition, but is not willing to hold early elections – a condition opposition leader Antonis Samaras attached to his offer of a unity government earlier Thursday.

Further ratcheting up anxieties, Papandreou is facing a vote of confidence in Greek parliament Friday. Early Thursday morning there were rumors that Papandreou might resign. But early Thursday afternoon his office explicitly said he had no plans to resign.

CNN.com asked five experts to weigh in on the developing situation, including what’s next for Greece and what it feels like to be there amid the uncertainty. Here’s what they had to say:

If PM resigns, then it’s ‘caretaker status’

Heather Conley is a senior fellow and director of the Europe Program at the Center for Strategic and International Studies.

If Papandreou resigns, the Greek government will “go into caretaker status until early elections can be held,” she said. “I think it would be a foregone conclusion that Papandreou would have to step aside and a technocratic government – a government that would receive full support from parliament – to be that caretaker until those early elections are held.”

Greece is a ‘signal’ to investors

Kevin Dunning, an editor at the Economist with a specialization in Western Europe, points out that Greece’s debt is much bigger than its small economy. Greece’s financial woes have been a kind of “signal” to investors and people who keep their money in banks in larger economies in countries like Spain, Portugal and Italy, he said.

“They look at Greece and they see how the euro area is handling the crisis there, and they say, ‘If something bad happens in Greece that can’t be solved with such a small economy, what’s that mean to the country where my money is?’” he told CNN.

Investors and others may then begin to move their money out of those banks in larger countries, causing more harm to the overall European economy, Dunning said.

‘Myth of bankruptcy’

Stergios Skaperdas, an economics professor at the University of California-Irvine, recently wrote a paper outlining the seven myths of the Greek debt crisis. The first myth, he writes, is that default will be catastrophic for Greece.

“The timidity in defending Greek interests with the troika and Northern European politicians is a common denominator of the Greek government’s response to the crisis,” he writes. “How could “bankruptcy” be catastrophic when existing debt is unsustainable according to all disinterested parties and even according to many interested ones, including the German finance minister? The question is no longer about whether Greece should default, but rather about the size of the default and whether it should be “voluntary,” with the consent of the great majority of bondholders, or a unilateral one that involves a minority of them.”

Going back to drachma a ‘nightmare’

“In Greece, everybody’s under severe strain,” Antonis Papayiannidis, the editor of Greece’s Economic Review, told CNN. “Both our finances and our self-esteem is under acute pressure.

“But if, after all, the referendum takes place or elections take place in spite of what the government or prime minister do … we Greeks we have to think twice or three times before saying no to a situation” that would mean that Greece would leave the euro zone, he said.

He said the alternative to using the euro would be to return to the drachma, and that would be a “nightmare.” A growing body of economists is arguing that it may be wise to return to the former currency, according to a report Tuesday in the New York Times.

Why offer further assistance?

Graham Bishop is an independent analyst of EU financial affairs and provides Continuing Professional Development (CPD) on EU financial regulation at www.GrahamBishop.com.

“It would be difficult to see why the euro zone should offer further assistance – unless it was very clearly in its own interest to do so,” he writes in a CNN.com Opinion story Wednesday.

“The risk of euro zone bank failures (and knock-on effects) has been a major incentive but, by the time of the referendum, all EU banks should have been analyzed even more deeply by their regulators and recapitalization plans prepared. That analysis should be extended immediately to include counter-party risk – the risk of a domino effect – as it will be obvious that there will be no one to bail out the Greek banks themselves, so prudent outsiders should assume that they will all fail, and plan for the natural consequences.

Immediately after the referendum, Greece will still be a member of the EU: their implicit decision to default on loans from the EU ought to carry the automatic sanction that there will be no further disbursements of EU structural funds, agricultural subsidies, EIB loans and the like. Planned capital injections of this type currently total about 7% of Greek GDP.”