A very interesting take on the possible Greek referendum on austerity measures and bail out terms from Tyler Cowen:

Make no mistake about it, the decision to hold a "referendum" is a decision to turn down the deal altogether. The referendum will never be held. It is scheduled for January and the current deal, which is not even a worked out deal, won't be on the table by then. It's already not on the table. The opposition leader is already opposed to the referendum, there are months more of market volatility to come, the other EU powers will get skittish about the deal, how is the conscientious Slovakia supposed to feel, and how many other factors do I need to cite? And how can the Greeks decide how the referendum will be worded?

This is a way to back out of everything, under the guise of "democracy" and ex post blame the speculators and the rest of Europe.

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In other words, the deal would make the country totally bankrupt. Greek voters already feel blackmailed. A good rule of thumb is that if a very unpopular government holds a referendum on something - anything - that government will lose. Seriously now, which way do you expect the Greek bus drivers to vote?

Yesterday, it appeared possible that the Papendreou government might collapse as several socialist deputies indicated they would vote against a referendum - which means they may bolt the prime minister when a vote of confidence, scheduled for Friday, is held. Later, the cabinet approved the referendum which staved off the immediate fall of his government.

Perhaps it is an electoral ploy by Papendreou who knows that if he loses the no confidence vote, the opposition will be faced with passing the austerity measures themselves - the very measures they have been opposing for months - or see a Greek default. Making the opposition responsible for austerity would hold the socialists in good stead if, as expected, early elections were called for next year.