Greek cabinet backs George Papandreou's referendum plan

George Papandreou arrives for cabinet meeting 1 November 2011 The Greek prime minister says a referendum will send a clear message

Greece's cabinet has given unanimous backing to a controversial plan by PM George Papandreou to hold a referendum on a EU debt rescue package.

He told an emergency cabinet meeting a referendum, possibly in December, would offer "a clear mandate" for austerity measures demanded by eurozone partners.

Stock markets recorded big drops amid shocked reactions in eurozone capitals to the referendum announcement.

Mr Papandreou is due to meet European leaders in France on Wednesday.

In a cabinet meeting lasting late into Tuesday night, Mr Papandreou told ministers the government needed the consent of the Greek people.

In a statement released by his office, he said: "The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro."

Mr Papandreou also said a possible alternative of snap elections would risk Greece defaulting on its debt.

The Greek government faces a crucial confidence vote in parliament on Friday.

One MP from the governing Pasok party has resigned, cutting Mr Papandreou's parliamentary majority to two - and six other leading party members have called on him to resign.

Market turmoil


There is opposition within Mr Papandreou's Pasok party to his decision to hold a referendum, even though the cabinet expressed unanimous support. So there are fears that if Friday's confidence vote does not go as planned, then potentially this government could fall even before a referendum is held.

This was an apparently personal decision to call it. What seems to be the case is Mr Papandreou wants to take the responsibility for the austerity measures away from his shoulders and put it on the shoulders of the Greek people, to say: I need the support of the Greek people to push through this austerity drive, to continue to receive bailout money.

But he is facing a massive hurdle in trying to win support for this. He is playing a very dangerous game, and so, he has now thrown Greece into a political crisis to add to its financial woes.

Following the seven-hour meeting, government spokesman Elias Mossialos said: "The cabinet expressed its support."

"The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated," he added.

Speaking on state television on Monday, interior minister Haris Kastanidis said there was a possibility the referendum could be held "within December", Reuters reported.

Monday's referendum announcement led to sharp falls on world markets on Tuesday. Asian markets also continued their slide on Wednesday.

The planned referendum threatens to unravel a deal reached at a EU summit last week aimed at resolving the euro debt crisis.

Leaders agreed on a 100bn-euro loan (£86bn; $140bn) to Athens and a 50% debt write-off.

But in return, Greece must make deep cuts in public spending, slashing pensions and wages and making thousands of civil servants redundant.

There have been widespread protests in Greece against the measures.

Three-way talks

On Tuesday President Nicolas Sarkozy of France said Mr Papandreou's decision "surprised all of Europe".

The French and German governments said they wanted "full implementation" of the agreement "in the quickest time-frame".

Mr Papandreou is to hold hastily arranged talks on Wednesday with Mr Sarkozy and German Chancellor Angela Merkel, on the sidelines of a G20 summit in France.

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

In a joint statement, President Sarkozy and Chancellor Merkel said the decisions taken by last week's EU summit were "more necessary than ever".

"France and Germany are convinced that this agreement will allow Greece to return to sustainable growth," they said.

Last week's marathon EU summit was intended to rescue Greece and bring the 17-nation eurozone back from the brink of disaster.

Eurozone chief Jean-Claude Juncker said if a referendum rejected the bailout, it could mean bankruptcy for Greece.

"It will depend on the manner in which the question will be exactly formulated and on what the Greeks exactly vote on," he said.

Confidence vote

Some Greek government ministers had been unaware of the referendum plan until it was announced.

The announcement even took Greece's Finance Minister Evangelos Venizelos by surprise, Greek media reported.

One MP from the governing Pasok party has resigned, cutting Mr Papandreou's parliamentary majority to two ahead of Friday's confidence vote.

The Greek opposition has called for early elections, saying the referendum jeopardises Greece's EU membership.

Antonis Samaras, leader of the main opposition New Democrats, said: "In order to save himself, Mr Papandreou has posed a dilemma of blackmail that puts our future and our position in Europe in danger."


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  • rate this

    Comment number 290.

    referendums= the voice of the people=democracy

    It's funny how the eurocrates who are supposed to be working in the best interests of the people absolutely hate the people having a say.

    Of course the true masters are the financial institutions that got us to this stage in the first place and It's only through people power that we will be able to resist total domination by the finacialists

  • rate this

    Comment number 289.

    It seems there is no way but for them to default and become poverty stricken for 20 years. Then they will really see the consequence of being addicted to debt.

    If that's what the people vote for them let tham have what they want. Democracy as someone said.

  • rate this

    Comment number 288.

    Hold the Olympics at Marathon every 4 years instead causing disruption elsewhere and every country who takes part shall make a proportional distribution to a central fund to pay Greece to operate it. This will give Greece income, employment & boost its tourist economy.

  • rate this

    Comment number 287.

    The rest of the Eurozone should revoke the agreement made last week, and eject Greece from the Euro. They are blatantly taking advantage of the generosity of their fellow-Euro members, while not having the guts to make their own people understand their situation. Papandreou is a weak and spineless excuse for a leader.

  • rate this

    Comment number 286.

    So sad that so many of you are eager to label all Greek people as immoral, lazy cheaters... I guess trying to distinguish between those who are at fault and those who aren't is beyond your specs. Oh, well time to find our "lost respect" I guess the only way to do that is to wage war at some country, accuse them of weapons of mass destruction and slaughter them. Of course we'll blame someone else

  • rate this

    Comment number 285.

    It's like turkey voting for Christmas,

    I know why politically he had done this so if does go through he can say you voted for it and if it doesn't he wins a popularity contest with the electorate although unpopular with the EU

    Sometimes you need to do unpopular things as a leader,

  • rate this

    Comment number 284.

    i don't see it that way, asking 'the people' is is a way of saying - "don't blame me - you said..."
    Popydopydo does care either way.

  • rate this

    Comment number 283.

    The referendum will be the trigger for the failure of the Euro and the demise of the banks who lent money to Greece.
    Portugal Italy Spain and Ireland are no doubt watching the proceedings with avid interest. If Greece does not pay it's debts they will see no reason why they should either. The end product will be catastrophic failure of banks and the European Union.

  • rate this

    Comment number 282.

    This isn't democracy in action, this is a man trying to save his political neck. He knows that implementing the cuts will cause him domestic hassle. Greeks should start instead to pay their taxes and stop being such a cash based society. What on earth did they expect would happen. The Euro is all but dead now,

  • rate this

    Comment number 281.

    Greek PM George doing the right thing!!Geece will teach
    once more Democracy to the rest of the world.

  • rate this

    Comment number 280.

    So 'why should we have to...'' = democracy eh? Referenda, if not about fundamental mechansims of Governance, (like the Term of Parliament) are just abrogations of responsiblity by trained and educated specialists, avoiding unseen career consequences their very well paid and sought after jobs now require, This is career lifeboating by the very highly paid.

  • rate this

    Comment number 279.

    Get out quick heavy shelling starting soon ; what a waste of time and money all this nonsense is !! history may repeat itself look back to 1936 mass unemployment , no money , political chaos ; result second world war !!

  • rate this

    Comment number 278.

    Papandreou has taken the first step in the traditional 3 step French system for dealing with German aggression.
    Step 1. Pompous sabre rattling.
    Step 2. Unconditional surrender.
    Step 3 Grovelling collaboration.

  • rate this

    Comment number 277.

    The people who allowed Greece to pile up this kind of debt should be the ones blamed for this crisis. And we all know who they are.

  • rate this

    Comment number 276.

    Brilliant piece of political manoeuvring on the part of the Greek PM and even better is the eurocrats are fuming because the people will get to have their say which is true democracy and all this from the country that gave us democracy in the first place. Brilliant stuff. Only people power is going to change the grip that finacialism has on all of us. referendums all round please.

  • rate this

    Comment number 275.

    Isn't this a perfect example of the way over-indebtedness undermines democracy? Anyone who's in serious debt should know that the lender calls the tune. Capitalism (while far from perfect) isn't the problem per se: excessive debt is the problem here, as it is worldwide. It's not Capitalism v Democracy, it's Debt v Democracy.

  • rate this

    Comment number 274.

    Oh, these crazy Greeks! Once, they spent too much and had no idea and troubles of where money had been taken from. They dragged all EU into deep pit and now they refuse to repay their debts. It seems like they dont understand clearly what future waits for them if they are out of EU in such a manner. Its indescribable disgrace. I will never sorry them for all these troubles for EU!

  • rate this

    Comment number 273.

    He must be the first prime Minister on a world stage since Churchill to show some real backbone. He's going to ask the people what they want, he along with ALL politicians act on behalf of the people after all, whether or not the outcome will be bad for the rest of Europe, which it will, is not his main concern and rightly so. Good to see he'll ot be bullied by the odious EU.

  • Comment number 272.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 271.

    To those who say the E.U. should have checked the Greek accounts more thoroughly before admitting them to the Eurozone, would these be the same E.U. accountants who present their own accounts to the independent auditors each year, only to have them rejected every year for more than a decade when the figures don't add up. (are they fiddling while the E.U. burns?)


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