Insight: Isolated Papandreou acts alone in referendum gamble

Greece's Prime Minister George Papandreou arrives for a cabinet meeting inside the parliament in Athens November 1, 2011.

ATHENS (Reuters) - Through grueling euro-summits, he has looked glum, wistful, even isolated; but no-one would have guessed Greek Prime Minister George Papandreou was weighing the announcement that sent shockwaves through Europe on Tuesday.

Even his Finance Minister was kept in the dark until, at a meeting of deputies of his socialist party, he called a referendum on a bailout agreed only last week. What then was the genesis of the plan critics and many allies fear could pitch Greece into financial disaster? Impulse or calculation, albeit it of a kind impenetrable to most?

Both traits are to be found in the character of 59-year-old Papandreou, son of a family with a long tradition in top-level Greek politics.

"Nobody knew he was going to do it," said a senior government official who requested anonymity. "He made the decision on his own and only a couple of close advisers had been informed."

Some of his PASOK party's 153 deputies clutched their faces, many looked at each other in disbelief, when he announced his move.

A 'no' in the Greek referendum would deal a serious blow to the political edifice constructed in Europe to avoid another war and could bring down the continent's single currency, with catastrophic results.

"This is his final stand. He feels systematically undermined from within so he decided to expose it all to a public discussion," said an aide who requested anonymity.

"He has decided to take on all sorts of special interests and has declared all-out war."

Papandreou, born in the United States and in power for two years, appeared determined to shock Greeks into facing up to their responsibilities and the chronic failings of their system.

But the decision could also have profoundly personal roots.

A man used to popularity and acclaim even when his party languished in opinion polls, Papandreou may have found the public acrimony following from his austerity measures a bitter pill to swallow. He has looked increasingly isolated, attended by a dwindling group of close aides.

The debt crisis has taken its toll.

Media reported that an offer in June to step down if his conservative opponent agreed to a coalition government came directly after he was booed on the street.

Pressure increased from the streets, where protesters clashed violently with police, and from his own deputies, who said the latest wave of austerity measures agreed last month was the last they would approve.

Last month, Papandreou was forced to expel a former minister and family friend from the party group for voting against part of the austerity bill, reducing his parliament majority to 153 out of 300 seats.

Political analysts were baffled by the referendum move they saw as an elaborate way to fall on one's sword. With socialist deputies demanding a snap election or Papandreou's resignation, it seems likely the country will head to the polls before any referendum.

"This was not the best decision for the country," said Thanos Dokos, of the ELIAMEP think tank. "In times of crisis or war, if he is convinced about his policies, he does not ask for a public debate."

Those close to Papandreou said the announcement may have been sudden, but the decision was long in the works.

The heir to one of Greece's main political dynasties -- his father and grandfather were also prime minister -- Papandreou came to power on tax and spend pledges to put the country on the path to "green growth."

But the affable former foreign minister stepped into a debt maelstrom as years of high spending and fudging of official economic figures caught up with this country. By his own admission, he was unprepared.

He told a news conference recently that when he assumed power, he did not know what a CDS (credit default swap) was.

At a raft of EU summits that tried to hammer out a solution to the Greek crisis, he appeared increasingly gloomy.

"We must continue to work intensively to change everything that offends us," he said on Thursday in an address to the nation after the last summit.

"The crisis gives us the opportunity and the deal gives us the time to decide what is important for Greece."

BATTLE LINES

Aides say he has been shocked by the deep corruption and special interests that dominate Greek society and has felt isolated from many in his party, still dominated by the populist ideas of his late father, the socialist maverick.

With key bills like a tax reform and the 2012 budget ahead, demands from MPs for Papandreou to try to share the burden with other parties could no longer be ignored.

He broke the referendum news at the end of a long speech to his parliamentary group late on Monday.

Finance Minister Evangelos Venizelos, a constitutional law professor, spoke straight after him, backing the decision and giving the impression he had been briefed.

"Venizelos had no idea about the referendum," a government official told Reuters on condition of anonymity.

Venizelos told Papandreou that Greece's foreign partners who have been hammering out a second bailout deal should have been informed beforehand and a letter for them was hastily drafted in the early morning hours of Tuesday by the finance ministry.

At about that time, Venizelos was rushed to hospital with abdominal pain. From his hospital bed he spoke in the morning with German Finance Minister Wolfgang Schaeuble, EU Monetary Affairs Commissioner Olli Rehn and IMF mission chief for Greece Poul Thomsen.

Monday's decision cost Papandreou another deputy, who resigned saying she disagreed with the referendum. Two others asked for snap elections and a cabinet meeting later may spell the end of his government.

"He is motivated by a sense of duty and he will fight to stay on for as long as he can," his aide said. "Those are the battle lines."