Ennis Daily News

Greek govt teeters over referendum turmoil


ATHENS, Greece (AP) — Socialist lawmakers in Greece revolted Tuesday over their prime minister’s surprise decision to hold a referendum on a European debt deal, threatening the very survival of his embattled government.

Prime Minister George Papandreou’s announcement unleashed political and market turmoil around Europe and the world, raising fears his government would fall, Greece would default on its massive debts and the 17-nation eurozone could break up.

The reaction in the markets was brutal, particularly in Europe, with the Athens exchange down 6.8 percent. Germany’s DAX and France’s CAC-40 both slid 5.2 percent and Italy’s main index slumping 6.7 percent. The euro sunk and borrowing costs rose for Italy and Spain, two other troubled eurozone members.

European officials and analysts expressed dismay over being blindsided by the move after they thought a deal had been agreed upon to solve the continent’s debt woes.

“While it may be the democratic thing to do … what happen if Greece votes ‘No’?” said Michael Hewson, analyst at CMC Markets. “The resulting fallout could well result in a complete meltdown of the European banking system and throw Europe into turmoil.”

A top European official warned that if Athens were to go ahead with the referendum, it might not get the bailout funds it needs to avoid bankruptcy in two weeks.

Jean-Claude Juncker, who chairs eurozone ministerial meetings, said planning a referendum “is a dangerous decision” that could put at risk Greece’s next bailout loan of €8 billion ($11 billion). Athens runs out of money to pay pensions and salaries by mid-November and faces bond redemptions in December.

The Socialists have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over austerity measures, and a vote would let them pass the responsibility for the country’s fate onto the Greek people themselves.

But it was not even clear Papandreou’s government could last long enough for the proposed vote to take place — or even last until a confidence vote on Friday.

At least four Socialist lawmakers openly rebelled. One defected, whittling Papandreou’s parliamentary majority to just two deputies in the 300-member legislature. Another called for an early election, a third urged that a unity government be formed to safeguard the European deal, and a fourth refused to support the public referendum. Six other Socialists also called for Papandreou’s resignation, Greek media reported.

Greek opposition leaders who have vehemently refused to back the government’s austerity measures called the move a political ploy.

“In his attempt to save himself, Mr. Papandreou set a divisive, blackmailing dilemma that endangers our future and our position in Europe,” conservative New Democracy party leader Antonis Samaras said.

Many wondered why Papandreou decided to call for a vote on this debt deal when he did not ask for one last year when Greece got its first international bailout.

“I cannot back a referendum which is a subterfuge by a government that appears unwilling to govern,” said Socialist deputy Hara Kefalidou said.

Papandreou appears to have told few people about his decision beforehand, leaving even his finance minister, Evangelos Venizelos, in the dark.

An official close to the finance minister said Venizelos “found out about it along with all other Greeks” during Papandreou’s speech, which was televised live, to party lawmakers in parliament late Monday. The official spoke on condition of anonymity to discuss sensitive details.

Papandreou and his finance minister appeared to be in damage control mode Tuesday.

Venizelos was hospitalized early Tuesday with stomach pains, but still spoke by phone with German Finance Minister Wolfgang Schaeuble, Deutsche Bank chief executive Josef Ackermann, EU’s Monetary Affairs Commissioner Olli Rehn and Poul Thomsen, the International Monetary Fund’s mission chief for Greece.

Papandreou, meanwhile, talked to German Chancellor Angela Merkel and held an emergency meeting with his ministers later. He was also called to a meeting Wednesday in Cannes ahead of the G20 summit to speak with the French, German, European and IMF heads.

For lawmaker Milena Apostolaki, who declared herself an independent, the proposed vote was the final straw.

“The crisis in the country has taken on uncontrollable dimensions and is threatening the cohesion of Greek society,” Apostolaki said in her letter announcing her party resignation.

She described the plebiscite as “a deeply divisive procedure.”

Prominent Socialist Vasso Papandreou called for a cross-party government to be formed to safeguard the European debt deal — essentially demanding the prime minister’s resignation. As soon as that is done, she said, an early election should be held.

“The country is in danger of immediate bankruptcy,” she told reporters.

Lawmaker Eva Kaili backed calls for the premier’s resignation, saying the referendum risks overturning the European debt deal and leading Greece into bankruptcy.

Greece has been surviving since May 2010 on a multibillion international bailout, but a second bailout is needed. European leaders held marathon negotiations last week to arrive at a new debt deal, which aims to seek 50 percent losses for private holders of Greek bonds and provide the troubled eurozone member with €100 billion ($140 billion) in additional rescue loans.

Other European nations, including France, also held emergency meetings on the Greek move.

The Netherlands’ Labor party, whose support the Dutch government needs to pass the European debt deal through parliament, called the proposed Greek vote a “deal-breaker.”

The Fitch ratings agency described the Greek premier’s decision as being one that “dramatically raises the stakes for Greece and the eurozone as a whole.”

 

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Posted by on Nov 1 2011. Filed under Off-the-wire, World news. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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