Greek crisis: Papandreou promises referendum on EU deal

 
Prime Minister George Papandreou delivers a speech to the Greek Socialist party (31 Oct 2011) Prime Minister George Papandreou says he will respect the will of the Greek people

Greece will hold a referendum on a new European Union aid package intended to resolve the country's debt crisis, Prime Minister George Papandreou says.

Last week eurozone leaders agreed on a 100bn-euro loan (£86bn; $140bn) to Athens and a 50% debt write-off, in a effort to tackle the euro crisis.

But there have been large-scale protests in Greece against austerity measures demanded by the EU.

Analysts say a referendum could derail the wider deal on the euro debt crisis.

The Greek rescue package is a key part of the agreement reached last week after marathon talks between eurozone leaders.

They said banks holding Greek debt accepted a 50% loss, the eurozone bailout fund will be boosted to about 1tn euros and banks will have to raise more capital.

The Greek plan has rattled the financial markets.

The FTSE 100 in London opened 2.2% lower, the Dax in Frankfurt fell 3.5% and the Cac-40 in Paris dropped 3.4%.

This came in the wake of sharp falls on Monday, when the main European indexes closed lower by around 3%.

In Asia on Tuesday, the main indexes in Japan, Hong Kong and Australia all closed down by at least 1.4%.

'Final say'

Latest Planned Austerity Measures

  • New pay and promotion system covering all 700,000 civil servants
  • Further cuts in public sector wages and many bonuses scrapped
  • Some 30,000 public sector workers suspended, wages cut to 60% and face lay off after a year
  • Wage bargaining suspended
  • Monthly pensions above 1,000 euros to be cut 20% above that threshold
  • Other cuts in pensions and lump-sum retirement pay
  • Tax-free threshold lowered to 5,000 euros a year from 8,000

Opinion polls in Greece show that most people do not support the austerity deal.

Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros.

"The command of the Greek people will bind us", he was quoted as saying by AFP news agency.

He set no date for the referendum, but indicated that it would be held after details of the deal have been finalised with the EU and the country's creditors.

It is a big gamble for Mr Papandreou, who will argue that it is in Greece's national interest to support the deal, the BBC's Europe editor Gavin Hewitt reports.

But our correspondent says that many people in Greece say they prefer the chaos of default to years of hardship.

The junior party in Germany's governing coalition has criticised the referendum plan.

The parliamentary leader for the Free Democrats, Rainer Bruederle, said a No vote would mean the Greek government was declaring bankruptcy.

"This sounds to me like someone is trying to wriggle out of what was agreed - a strange thing to do," he told the Deutschlandfunk radio network.

Analysis

It is a big gamble by the Greek prime minister.

He will argue that it is in Greece's national interest to support the deal.

Without it, he will say, the country faces default and catastrophe.

He will base his campaign on an appeal to patriotism.

But on recent visits I have found many people would prefer the chaos of default to years of hardship.

The referendum is another hurdle for the eurozone to get over, says the BBC's Matthew Price, in Brussels.

It comes at a bad time for the eurozone and those who hoped the crisis was being contained, he adds.

Last Friday, there were protests in several cities around Greece.

An important annual parade was cancelled in Thessaloniki after demonstrators blocked the route and shouted insults at President Karolos Papoulias.

Socialist dissenters

Many Greeks believe the government has gone too far in allowing the EU and the International Monetary Fund (IMF) to dictate the austerity measures needed to secure the bailout.

Mr Papandreou has also faced growing dissent from within his own Socialist party over the impact of the measures.

The party's approval ratings have plunged and its parliamentary majority has been cut by several defections to other groups.

Eurozone deal key points

Greek debt

Private banks holding Greek debt will accept a write-off of 50% of their returns

Bailout fund

Bailout fund set up earlier this year to be boosted from the 440bn to 1tn euros

Banks

European banks will be required to raise about 106bn euros in new capital by June 2012

Analysts say the promise of a referendum allows Mr Papandreou's government, which has born the brunt of public anger over the austerity measures, to pass responsibility for the country's future to the Greek public.

"The new agreement will be submitted to parliament for approval and then submitted to the judgment of the Greek people," Finance Minister Evangelos Venizelos told the Antenna TV channel.

"The Greek people can, of course, say no but must bear in mind the consequences of that decision."

Opposition parties said the government had only announced the referendum to avoid having to call an early general election.

"The prime minister is trying to buy time," said Costas Gioulekas from the right-of-centre New Democracy party.

"We want clear solutions. And a clear solution is obvious: elections."

 

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  • rate this
    +1

    Comment number 562.

    I see the BBC thinks a bunch of infantile lefties sqawking outside St Pauls is a more significant story than this. I genuinely cannot comprehend that news judgement - it strikes me that it cannot be a fair-minded one, and more likely reflects the BBC desire that this story just *go away*....

  • rate this
    +3

    Comment number 561.

    I see no prospect for Greece other than to cut it loose from the EU entirely. They were better on their own, poor and happy. All I see around me now is the result of greed, it's not nice. One restauranteer said to me yesteday, 'back to the fifties we were not as poor as we are going to be now'. Well at least they will be left with a nice airport, metro system and national highways.

  • rate this
    +2

    Comment number 560.

    The Soviets also tried to enslave the people of Europe in a superstate

    All these efforts are the dreams of intelligent people with no grasp on reality
    In its final desperate hours the EUs strategy is to refuse self determination

    The EU administration is now falling apart at the seams and as one of the little people I can say that this is every bit as good as those days when the wall came down

  • rate this
    0

    Comment number 559.

    I suppose this is one of those occasions where 'rien ne va plus' means 'nothing is going anywhere'.

  • rate this
    +8

    Comment number 558.

    Its always easiest to say that it is someone else fault... But Greece.. Its time to look inwards, and realize that building a country on corruption, mafia, non existing tax system, over borrowing and living beyond your means... eventually will catch up with you. And don't look around for someone else to pay the bill. ... Its only fair to clear up the mess you yourself created.

  • rate this
    +2

    Comment number 557.

    If our prime misister had a brain to use then there would have been an explanation to why he is doing this , but he hasnt , and we have elected him with big majority , and as it goes , democracy is that mechanism that ENSURES that noone gets a better goverment that they deserve
    and i am more sorry than anyone to say that

  • rate this
    0

    Comment number 556.

    We as global population have an issue here.

    What many Greek people do not understand is if they default, not only will it send a shock-wave throughout the world crippling many other nations and not just itself; it would in the long term endanger its future capital funding by having government debt that is worthless, and a nation that would be in 'years of hardship' regardless of the outcome.

  • rate this
    +4

    Comment number 555.

    If there was ever a reason why we stayed out of the Euro, this is it. What beggars belief, however, is that we're playing and paying along with it as if we didn't. Given that debts cannot be repaid by countries that need bailout, how is it to our advantage to prop these countries up? Exports to Greece are less than £400million. Yet they owe the UK and its banks more than £12billion! Stupid.

  • rate this
    -1

    Comment number 554.

    541.ontheroadscot
    Who commited the greater wrong?
    ...
    Or... (hint)
    3. All of us, for having allowed it to happen right under our noses
    ==
    And yet I wouldn't mind betting that you are one of the people moaning about the demonstrators outside St. Pauls who want to stop these very things happening again. So how do YOU suggest we should have stopped it in the 1st place?

  • rate this
    +2

    Comment number 553.

    this is all an orchestrated deception so that Greece can leave the euro without Germany and France losing face.

  • rate this
    0

    Comment number 552.

    Who committed the greater wrong?

    1. The mystery 'Bankers' were naive but were mislead
    2. The 'Greeks' did the misleading
    3. All of the rest of us, had no way of knowing about or changing this unravelling catastrophe

  • rate this
    +2

    Comment number 551.

    Greece The birth place of both mathmatics and democracy and much more, Made into the whipping boy of Europe by outside forces', The greek people will vote No to the Euro bailout or its a bleak time for many workers, and massive cuts to all services bring back the old currency, or join the £ and bring back the holiday trade.and get the tourist back spending money.

  • rate this
    +6

    Comment number 550.

    Papandreou has put the Greek finger on the Eurozone nuclear button and they will push it.

    There will be a dramatic but ultimately necessary unravelling of the Eurozone project.

    The UK must look to protect itself and develop markets elsewhere.

  • rate this
    0

    Comment number 549.

    Apart from the depression of the 1930's, caused by a (relatively) small number of people being greedy with the markets (deja vu) all nations have got this far (barring a few years) using their own currency. A return to that would be no bad move.

    In fact, the only reason I can see for a united currency is that it would give our good and great traders something less to gamble our money on.

  • rate this
    -2

    Comment number 548.

    The timing of Mr Papandreou's announcement is interesting. Today is a national holiday in several EU countries incl. Portugal, Spain, Italy, France and parts of Germany. Are most of the European bourses closed today? It is as if the timing was carefully selected so that the impact on the European markets would be as soft as possible. Maybe this all was planned in last week's EU summit?

  • rate this
    0

    Comment number 547.

    541. And there it is....

  • rate this
    -1

    Comment number 546.

    Typical Greek people - looking for others to blame for their own mistakes. Let them suffer.

  • rate this
    0

    Comment number 545.

    Atleast the Greeks have been given a say. What about our leader learning something about democracy?

  • rate this
    0

    Comment number 544.

    The Greeks now have the chance to blast off the Death Star EU. Good luck to them. Cheaper Greek holidays are on their way again.

  • rate this
    +2

    Comment number 543.

    The Greeks have only themselves to blame for the debt they are in. If you go from the donkey to the mercedes in twenty years something has to give.Greeks are great people but if they allow their village mentality to cloud their minds and their lives they get the economy they deserve.
    Pay your taxes, pay your dues in everyday life and take out the corrupt system of backhanders to officals. Im wrong

 

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