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."

 

More on This Story

Global Economy

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    +3

    Comment number 582.

    554 RedRebel54 "So how do YOU suggest we should have stopped it in the 1st place?"
    1. Everyone including nation states should have a basic understanding that money doesn't grow on trees i.e. controlled spending within ones means
    2. Expand high school education to include economics and politics (and make it interesting and engaging as it has to compete with football and X Factor for attention)

  • rate this
    +1

    Comment number 581.

    514.David Horton
    ......Here in UK, the EU as it exists today has never been decided on as a single issue by the people, therefore it's version of democracy is wholly invalid, until tested.
    -
    And neither have we decided our part in the change in NATO's role, the Special Relationship, The Iraq war, Suez, a bigger UN, the royal succession etc. etc We don't have Government by referendum.

  • rate this
    0

    Comment number 580.

    The EU must have given up on Greece at that last meeting.
    This EU referendum is highly unusual, normally the EU is the sworn enemy of Democracy.

    Everyone knows that the Greeks want out, and they will say no to a lifetime of debt slavery within the EU.

    So this referendum must be a face saving exercise for France and Germany, instead of simply kicking Greece out of the Euro.

  • rate this
    +3

    Comment number 579.

    It's not Greece, it's most of Europe (and the US); to get the votes politicians borrow and spend like there's no tomorrow, and voters would never vote for a government that said it would reduce public services. Well tomorrow is today, it's now!
    Our lifestyles will unravel if state spending is not brought in line with income. It could be done with a small global reduction but imagine the screams.

  • rate this
    +1

    Comment number 578.

    This referendum is a good demonstration of what a rogue person can do. Papandreou acted alone, he has not consulted anyone inside or outside Greece before proceeding and is dragging the whole country and the eurozone into trouble. He has to go.

  • rate this
    +1

    Comment number 577.

    Therescue package is a fraud. The banks to lose 50% of the interest NOT the capital. They took a risk, lost and expect the taxpayer to pay. In the northern states this results in unemployment. In Spain 40% youth unemployment. With austerity reduced tax receipts more unemployment. The only remedy - pull out of Euro devalue currency and start again. Banks bankrupt are natio

  • rate this
    +1

    Comment number 576.

    I suspect the question will be worded along the lines of "Would you prefer to spend 25 years in purgatory paying off the Germans or burn in Hell and Damnation"

  • rate this
    +1

    Comment number 575.

    There will be no EU financial meltdown because of Greece. The Greek economy represents just 2% of EU GDP. They should get busy and learn how to make something themselves and improve their national performance because it is almost 3rd-world level. We'll be dropping food parcels from helicopters to them next.

  • rate this
    +3

    Comment number 574.

    I do not believe that greece will vote no..
    here in greece there is a lot of anger for the politicians that are responsible for the almost 30 years of amateur goverment..
    ..yes, the problem was born here, we ought to pay for it,...
    ....papandreou "has already lost the game"...
    ...it is not time for referendums..why referendum now..?...
    now its time for work ......

  • rate this
    0

    Comment number 573.

    552. I think the point is that for a long time an awful lot of people (and institutions) were happy to indulge in a 'spend now, pay later' mentality, and now the chickens are coming home to roost.

  • rate this
    0

    Comment number 572.

    Greece will probably be the first of the euro dominoes to fall, if they reject the austerity deal. If that does happen, I suspect mayhem will follow in Italy, Spain and who knows where else! A modern day South Sea bubble.

  • rate this
    +1

    Comment number 571.

    Suicide is painless... yes! History shows that countries that default on their debt recover much more quickly than if they struggled through years of painful austerity. Will countries / banks lend to them again? Of course, because they will be much stronger as a result of the default. Full defaut, exit the Euro, start again with no debt, learn from mistakes - sounds like a good option to me.

  • rate this
    0

    Comment number 570.

    The referemdum is great for Greece and their people and unceptable for Europe. After the great efforts made to reach a solution they come with this... incredible irresponsibility!. I have always support to do the best efforts to help Greece but for me this has been the last straw.

  • rate this
    0

    Comment number 569.

    @ 546. Ottohess

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

    My goodness you are intelligent!

    By any chance do you know any Greek people?

    Clearly you are unable to see the bigger picture.

  • rate this
    0

    Comment number 568.

    This is stupid. These measures *need* to happen, there's not really much in there to debate. To vote "no" is economic suicide, however looking at the protests I fear that the Greeks will vote like lemmings.

    Seriously, if they vote "no" then what would they expect to happen? Everything to go back to how it was?

    That's like voting "no" to chemo in the hope everything will go back to normal.

  • rate this
    +2

    Comment number 567.

    Finally, is the beginning of getting this over with so we can all move on , the sooner its done ,the better in my opinion, it always was inevitable, we can all still carry on trading, paid in euros, francs, marks or Drachmas its all money, and better still you can spend it down the shops !

  • rate this
    +2

    Comment number 566.

    It's time to ring fence Greece, protect those at danger from Greece, not Greece itself.

    Some will blame the bankers, but no banker forced Greece sustained an unmanagable decfecit year on year on year.

  • rate this
    +2

    Comment number 565.

    554.
    RedRebel54


    The Eurozone should have enforced its own rules which would have meant Greece leaving the euro, years ago. This could have been done in an orderly manner. However , political dogma within the empire builders of the EU was placed above the rules and economic reality in pursuit of a false utopia. The same lala land thinking as the St Pauls singers and dancers

  • rate this
    0

    Comment number 564.

    Bring the whole precipice down, the bubble of debt added to debt for debt must be stopped. Hopefully the Greeks will trigger this off.

    We cant afford to keep on upping the ante

  • rate this
    0

    Comment number 563.

    550. Bradford

    ..and where exactly would you look to 'develop' markets elsewhere. The EU is our largest trading partner by some margin. The idea its will all uunravel nicely and we can move our business interests elsewhere is farcical and naive.

 

Page 6 of 35

 

More Europe stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.