The past two weeks have been a non-stop roller-coaster ride for Europe and the global economy. After the Pyrrhic victory at the make-it-or-break-it EU summit in Brussels last week, we wrote a critical assessment arguing why the agreement wouldn’t hold up much longer than a few weeks or months at most. We turned out to be much too optimistic. Within days, the accord had crumbled and European leaders were back in emergency talks.

So our politicians these days have a way of outdoing even the most pessimistic prognoses; but they also have a way of confirming even the most paranoid suspicions. Nothing more blatantly confirmed the self-evident attack on European democracy than the EU’s response to Papandreou’s bombshell announcement of a Greek referendum. Terrified at the prospect of some Greek schmuck messing with their divine plan, Merkel and Sarkozy cajoled Papandreou back into submission and practically pushed for a silent coup by his Finance Minister Evangelos Venizelos.

The whole affair was extremely embarrassing for everyone. Embarrassing for Venizelos, who had to call his friends in Berlin, Paris, Brussels and Frankfurt to apologize for the sudden democratic intuitions of his boss; embarrassing for Papandreou, who was summoned to a humiliating public dress-down at the G20 in Cannes and forced to back-peddle on his plans; embarrassing for Berlusconi, who saw Italy being sucked into the heart of the storm by the resultant market panic; and embarrassing for Merkel and Sarkozy, whose anti-democratic tendencies were plainly revealed for all to see.

Granted, Papandreou’s motives for calling the referendum were questionable from the very start. As Costas Douzinas pointed out in an excellent article, there are many ways in which a plebiscite can be mobilized for fundamentally counter-democratic purposes. Many in Greece rightly felt that Papandreou, rather than consulting the people, was putting a gun to their heads, blackmailing them into submission. After all, if he was truly so committed to direct democracy, why did he not hold his referendum before submitting the people to two years of economic austerity and police brutality?

Still, the response of EU elites was telling. Rainer Bruederle, head of the Free Democrats, Merkel’s coalition partner, exclaimed that he was “irritated” by Greece’s “strange way” of acting, while Michael Roth of the Social Democrats warned Papandreou that he was “playing with fire.” In one of the most revealing statements, Swedish Foreign Minister Carl Bildt tweeted: “I truly fail to understand what Greece intends to have a referendum about. Are there any real options?” His words clearly echoed Thatcher’s fundamentalist dogma that “there is no alternative.”

Jean-Claude Juncker, President of the Eurozone, put it in no uncertain terms: “We are at war. The crisis is that bad. And it’s time that Greece put party politics aside and demonstrate national unity.” He was the first to threaten Greece with withholding the next, crucial tranche of its 2010 bailout package, without which it will go bankrupt next month. Angela Merkel was quick to follow up on this diplomatic blackmail, making it very clear to Papandreou that “the euro is more important than Greece.” Their message to the Greek people was plain and simple: “shut up and step back in line!”

Meanwhile, French President Nicolas Sarkozy at least tried to give the impression of being a democrat: “giving people a voice is always legitimate, but [but!] the solidarity of all eurozone countries is not possible unless each one agrees to measures deemed necessary.” In other words, as Gavin Hewitt correctly pointed out for the BBC, “the needs of the eurozone trump democracy.” Ever since the EU unabashedly interfered in the Irish referendum, we have know that “Europe’s leaders often fear the people,” and that “they do not like the messiness of democracy intruding on their project.”

Similarly, Seumas Milne, correctly observed that “the controversy goes to the heart of Europe’s problem with democracy. It’s not just fear of the risks of delay on febrile bond markets that has caused apoplexy, but the danger that Greeks might vote the wrong way. Voting is not how things are done in the EU. And whenever a state does actually consult its people – Denmark and Ireland had a go – they are made to vote again until they get it right.”

As a result, the project increasingly begins to resemble one of Empire. As Jean-Paul Fitoussi, an economist at Sciences Po Paris, told the New York Times: “it’s as if the Europeans — or Merkel and Sarkozy alone — believed that they were in control of the people of Greece. But this is a democracy. In Greece, and even in Italy, you cannot expect to rule without the support and consent of the people. And you can’t impose an austerity program for a decade on a country, and even choose for them the austerity measures that country must implement.”

The reason for this imperial intrusion into a sovereign people’s affairs was summarized by Paul Donovan, an analyst at UBS, who pointed out that “good politics doesn’t necessarily make good economics.” More specifically, the powerful European banking sector is simply terrified of a large Greek default, as this would force them to write down vast amounts of assets and turn to their governments for another round of capital injections, which would dilute shareholder value and give states more internal leverage over banking practices, including executive pay and bonuses.

For this reason, the Institute for International Finance (IIF), the powerful banking lobby chaired by Deutsche Bank President Joseph Ackermann, has been viciously campaigning for a continuation of the Greek bailouts coupled with radical austerity measures. This way it hopes to squeeze as much repayment as possible out of the country before it inevitably exits the euro. It is an essentially parasitical practice that not only robs millions of Greeks of their livelihoods, but also unnecessarily pitches German taxpayers (who are indirectly saving their own banks) against their Greek counterparts.

An excellent investigation by the New York Times has just revealed how banker intransigence led to two years of delay in solving the crisis. For two straight years, the IIF and ECB vehemently opposed a Greek default. “People were raising questions,” Charles Dallara, the head of the IIF, told the Times. “But it was such a dramatic notion — having a European country default — no one could accept it.” Only last month did the banks come around to accepting a modest voluntary write-down of 50 percent. But by now, economist Willem Buiter argues that Greece needs at least a 85 percent write-down.

So why aren’t the Greek people allowed to vote on a policy that even the Chief Economist of Citibank considers to be good practice? Ultimately, the reason why Europe’s democrats are so terrified of democracy is that they realize perfectly well that, if the people had their way, the entire system of financial extortion would collapse. While the success stories of countries like Iceland, Ecuador and Argentina — all of whom defaulted on their debts — indicate that this might actually be a good thing, the vested interests of the powerful financial oligarchs have successfully blocked the option from even being discussed.

The moment that Papandreou broke the spell, by actually ordering a meal that was not on the menu, he was quickly summoned to the headmistress’s office for failing to tread the Party line. And so, after two years of waging war on his own people in the name of foreign creditors, it turns out that George Papandreou, once Merkozy’s favorite puppet, was but a dispensable toy in the hands of the European financial plutocracy. What will happen next, no one seems to know. The only thing that is certain is that European leaders will do anything in their power to prevent early elections. After all, you wouldn’t want national democracy to get in the way of European capitalism, now would you?