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 602.

    Will George Papandreou be acquitted of criminal charges in this 'Euro Scandal', as his father was in 1992 in relation to his involvement in the 'Koskotas Scandal'?

  • rate this
    -1

    Comment number 601.

    592.
    Alastair"Democratically speaking this is probabley the most responsible thing he's done in the last 2 years."

    The Greek govt is in fact dictating to the wider democracy which is supposed to be the EU. They are acting unilaterally without any regard for the whole that they are supposed to be a part of ,.Ironically , damaging the people that could help them

  • rate this
    -1

    Comment number 600.

    @Mr (531) "I hope they vote 'no' and are ruined. Since they joined the EU they have always received funds"
    -Greeks absorb

  • rate this
    +2

    Comment number 599.

    Throw them out of the Eurozone now; call in the loans and let us get on with the aftermath which would include a ban on any loans to Greece. I work for companies who want to invest and grow but the markets are so fragile they will not start; it will be a bleak Christmas.

  • rate this
    0

    Comment number 598.

    A referendum is political suicide in Greece. People abroad don't seem to understand that these austerity measures are killing this country. People are working without pay or with salaries of 200eur a month and getting taxed 2-3000 euro. furthermore every 2 months further austerity measures are demanded from the troika. these measures are bad for growth and increasing the deficit. they help no-one.

  • rate this
    +2

    Comment number 597.

    Start printing the New Drachmas, Lire, Pestas and Punts

  • rate this
    +2

    Comment number 596.

    On joining the Eurozone cheap credit was available to Greece and it took it with open arms. The size of the public sector swelled enormously and their wages doubled in ten years. On retirement pensions were approximately 83% of final salary. Greece also spent profligately in many other areas. Blame feckless lending if you will but
    feckless lending needs an even more feckless borrower - Greece.

  • rate this
    0

    Comment number 595.

    554.RedRebel54

    "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."

    =

    I'm not actually. I'm all for protesting against irresponsible and greedy behaviour, I just think that Spongers and Vultures are as bad as each other. The smellies at St Paul's are only against the Vultures

  • rate this
    +2

    Comment number 594.

    580 Ady
    "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."

    Did you actually read the article?
    This is not a EU referendum, it is somebody thinking that they can simply walk away from their commitments with no consequences for themselves or others.

  • rate this
    0

    Comment number 593.

    Just think of the level of the fear and misinformation of the 'No' side in our most recent referendum and times it by a million - the Greeks will be made so terrified of voting no, and those who support doing so so vilified, that a yes will be almost guaranteed. When the German leader is making thinly veiled allusions to war in Europe the manipulation of democracy is more 'acceptable' than ever.

  • rate this
    -1

    Comment number 592.

    @583.Rovertos
    So you don't think this is a serious enough issue for the greek people to have their say on because they're not responsible enough. How patronising of you.
    Democratically speaking this is probabley the most responsible thing he's done in the last 2 years.

  • rate this
    0

    Comment number 591.

    dg999999

    History shows that countries that default on their debt recover quicker than if they went through years of painful austerity. True, but this is the unknown, the world will be affected because of 'global markets'

    Will they lend to them again? Eventually after a global recession in many other countries.

    Exit the Euro, start again with no debt. At what cost? Crippling the global economy?

  • rate this
    0

    Comment number 590.

    Greece should never have been allowed to join the Euro in the first place. It failed every single one of the necessary conditions for membership but that was an inconvenient truth for the masterminds (sic) of the Euro project. Similarily, more than half of the other Euro members failed the tests but the numbers were massaged to suit.
    The kotopouloi have well and truly come home to roost.

  • rate this
    0

    Comment number 589.

    So, the Greeks don't want a 50% bail out or austerity? As the debt is in Europe, the debt is with us. Kick Greece out of Europe to remove European rights to European benefits etc. The remainder of Europe invades Greece to take land in lieu of payment (100% debt), Land, resources and tourist industry is portioned off to repay debts before they take all of Europe down.

    Game of monopoly really.

  • rate this
    +1

    Comment number 588.

    The fact of the matter is that the Euro needs to survive and when it does (there's no doubt, the world just can't afford to let it not) needs to implement a single political system across it's members. Get rid of the countries that can't/won't play ball and grow up - hold the banks to account and use a flexible policy for lending, i.e. don't lend money to those not in a position to pay it back!

  • rate this
    0

    Comment number 587.

    The EU must enforce its own rules now. Before the end of the day they must announce that Greece will leave the eurozone. This will be better for Greece and all the rest of us . The alternative is needless financial misery for countless ordinary people.

  • rate this
    +2

    Comment number 586.

    Greek In London, as a Greek yourself you must appreciate that Papandreou is the PM of GREECE, a representative of the Greek people and he's proposing to ask those very people to support - or not - his actions. He IS consulting the people that matter as Greece is still a democracy. You might not like the probable outcome but that's what democracy is all about.

  • rate this
    +3

    Comment number 585.

    Greek tragedy. Smart money will exit the country. The bail out deal will collapse. Greek banks will fail. The drachma will be reintroduced. Prices in Greece will rocket, with wages and pensions frozen or cut.. Austerity will be nothing to the hardships that will ensue. There'll be social chaos, and democracy may not survive. Turkeys voting for Christmas

  • rate this
    0

    Comment number 584.

    We can blame the idiot Gordon Brown for most of this - if he had not set the ball rolling by bailing out Northern Rock, purely for political advantage, the precedent wouldnt' have been set. 'bailouts' are no part of capitalism. The bad banks should have been allowed to fail, the countries with debt should simply devalue and recover over time, as Argentina did - instead, we face endless debt.

  • rate this
    -1

    Comment number 583.

    As it is right now in Greece, if a referendum was held with a question like "Do you want free beer?" the result would be 80% NO. The Greek people were always addicted to populist rhetorics and there are plenty of irresponsible nutcases around to drive the public off the cliff at 200 mph. This is a suicidal nation that's handed over a loaded gun. Our only chance is that common logic prevails.

 

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