Greek PM's big gamble on eurozone deal referendum

 
Protest against austerity in Thessaloniki, northern Greece, on 28 October 2011 Greeks have been protesting over the government's austerity measures

The Greeks get to vote.

Suddenly the Greek deal - which was a key plank in last week's eurozone agreement - is up in the air.

Greek Prime Minister George Papandreou surprised his own party and parliament by announcing a referendum and a vote of confidence.

"If the Greek people do not want it," he said, "it will not be adopted."

And if that happens the eurozone will be thrown into fresh uncertainty.

Last week, eurozone leaders agreed a second Greek bailout worth 130bn euros as well as banks agreeing to take 50% losses on their holdings of Greek debt.

His hand was forced by an increasingly ugly mood in the country.

Over the weekend, on an important national day marking Greece's wartime resistance to the axis, the president was heckled and called a traitor.

There were angry demonstrations denouncing the deal.

A poll suggested that 60% of the Greek people viewed the deal negatively even though it takes a chunk out of Greek debt.

The people are weary of austerity and of having decisions about Greece's future taken by unelected officials from the EU and the IMF.

Argued for

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 will only be held after the details of the latest deal with the EU are worked out.

That, of course, will enable the Greek government to barter for softer terms in the hope that may sway the voters.

The Greek government has become adept at playing Europe's leaders.

On the one hand they plead for European solidarity; on the other they know that a Greek default is feared because it could spark contagion in the eurozone.

There will be people who will argue that democracy has once again got in the way of securing a lasting deal to the eurozone debt crisis.

But, in the end, the austerity package in exchange for a new bailout could not just be forced on the Greek people. It will have to be argued for.

 
Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    +3

    Comment number 20.

    All beyond me--if Grreece is going to be tarred as non payers they might as well be hanged for a sheep (100%) as a lamb (50%), investors are not going to see any big difference and either way will not lend again, at least not for a very long time, especially as Credit Default Swaps no longer seem to achieve anything. Greece grows olives not BMW's. A pox on the Euro that caused all this.

  • rate this
    +3

    Comment number 19.

    Strikes me as being the correct and natural thing to do, and was probably discussed amongst the leaders in their summit of last week. We are looking at more and more unemployment, how else are you going to carry the people with you??????
    I hope they say no - so that we fix the problems with the system, rather than continue on the road to nowhere.

  • rate this
    +20

    Comment number 18.

    Whether the Greek people vote yes or no is not important. The fact that they have a choice and are able to exercise their democratic right IS important. This issue is one that will affect THEIR lives for many years to come, whichever way they vote. I for one would want a referendum if I was in their shoes. Good luck Greece, still leading the democratic way.

  • rate this
    -3

    Comment number 17.

    @12.
    Bob Ezergailis

    Do you really think, to go on alone would have a better outcome?
    You spent much more than you earn.
    You are Greeks, inventors of algebra. You know the commutative law. You could may keep your income in Drachme, but the Drachme would decline, or you keep the Euro, but earn less.
    In the second case, you'll have friends, that offer you a 50% debt relief.

  • rate this
    +10

    Comment number 16.

    So...

    Once again the eurozone is in uncertainty, chaos and turmoil until this referendum happens.

    And I thought the latest trumpeted agreement would calm everyone for at least 10 days....

  • rate this
    0

    Comment number 15.

    suck it up EU! afraid of No vote?( feel sorry for Germany a nation built on principles trusted a proven con artist a.k.a Greece) now either you pay up all the the Greek debt or face the downfall of Euro, you never learnt , haven`t you? Greek is the problem not a solution , the sooner you get rid of them the better,they will always play you like fools and leave off of you ,until you put end to it.

  • rate this
    +15

    Comment number 14.

    The agreement to a "voluntary" haircut was negotiated without Greek participation.
    It is only fair to seek some democratic legitimation now.
    The German Bundestag was asked to vote during the summit and this strengthened Merkel's negotiation position.
    Showing respect for the other parliaments too would help a great deal to restore mutual trust.
    May direct democracy heal the split within Greece!

  • rate this
    +6

    Comment number 13.

    It's a high risk movement without clear benefits. It can blow up everything the EU tried to build in the previous days but it's obvious that Greek PM cannot manage the lost of the country's national sovereignty. The great exodus for Papandreou, I think.

  • rate this
    +4

    Comment number 12.

    From a Greek viewpoint, the total effects of the European deal would put Greece into a worse position than it came from, effectively as deep in debt or deeper, combined with a degree of austerity it cannot really live with & pressures to sell off assets which supports 40% of the existing economy. It cannot afford a cut to half its economic base without growth investment from outside Greece.

  • rate this
    +4

    Comment number 11.

    Perhaps the comment by Sarkozy re Greece should never have entered etc has scored an own goal. Papa knows the Greek economy is worse now than it was when they joined the Euro, so by Sarkozys statements Greece would be better out of it. After all, when Sarkosy or Merkel speak, Europe has to listen.

  • rate this
    +10

    Comment number 10.

    @3.
    Penelope_R

    Several greece governments cheated the Eurozone partners from day one on.
    As a consequence, the economical system in the Eurozone and the rest of the world has big problems.
    Nevertheless the Euro partners negociated for months a solution, that helps Greece instead of letting it6 rott.


    And now you have the audacity to big mouth the rest of Europe?

    Just give us our money back.

  • rate this
    +4

    Comment number 9.

    The Greek have behaved like children, spent and spent without the taxes to pay for it. Now they have the cheek to say a 50% bailout isnt good enough ? I predict real anger across the Eurozone if the referendum doesnt pass and a destablisation not seen since 1945

  • rate this
    +12

    Comment number 8.

    Aha, so that's the game Papandreou has been playing - now it all makes sense. Any further comments would be slanderous.

  • rate this
    +19

    Comment number 7.

    Could this be a bargaining tactic on the part of the Greek Prime Minister?

    Threaten a referendum that will almost certainly end in a 'No' vote in order to get the EU/IMF to give Greece more favourably repayment or bailout terms.

    Checkmate, Papendreou?

  • rate this
    +19

    Comment number 6.

    3 P_R

    There is no time for more negotiations. If Greece backs away from this deal it will have to default. That will impose another kind of austerity, managed by the markets.

  • rate this
    +3

    Comment number 5.

    It will all end in tears.

  • rate this
    -4

    Comment number 4.

    I wonder how they're going to vote? Duh.

  • rate this
    -2

    Comment number 3.

    Greek people realize that this bailout will NOT improve its fiscal conditions for many years to come, but will give up the country's national sovereignty to the EU leadership, i.e. Germany.
    Thus, the vast majority of Greeks , as well as all opposition parties, want elections, in order to vote for a Government that can actually carry out proper negotiations, rather than take orders from Germany.

  • rate this
    +20

    Comment number 2.

    This just gets funnier and funnier. Now everyone has to wait for the Greeks to decide yes or no. So much for the all encompassing solution. Wonder what S&M are thinking about now?

  • rate this
    +19

    Comment number 1.

    They're really pushing it too far this time around. One of two things will happen - the EU/IMF will buckle in - perhaps good short term - disastrous to the eurozone in the medium. Or Greece will default - very bad in the short term for the rest of Europe but I'd argue still manageable. What's certain is that the eurozone needs a major revamp right now.

 

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