At a time when PM Papandreou is under intense political and social pressure, including from members of his own Socialist Party, the move was seen as the last card he could play. Opposition calls for immediate elections.
ATHENS – Prime Minister George Papandreou’s shock announcement that he will put Greece’s bailout to a referendum threatened to intensify the eurozone crisis, and brought complaints in Germany that Athens is trying to wriggle out of the deal, BBC informs. Eurozone leaders agreed last week to hand Athens a second, EUR 130 billion bailout and a 50 pc write-down on its huge debt. Papandreou told the Greek voters it was up to them to decide the country’s fate. “We trust citizens, we believe in their judgment, we believe in their decision,” he told Socialist party deputies. “In a few weeks the [EU] agreement will be a new loan contract … we must spell out if we are accepting it or if we are rejecting it.” Papandreou, grappling with Greece’s worst financial crisis in 40 years, said the referendum would take place in a few weeks. Finance Minister Evangelos Venizelos told Greek TV it would probably be held early next year. At a time when PM Papandreou is under intense political and social pressure, including from members of his own Socialist Party, the move was seen as the last card he could play. In this context, French President Nicolas Sarkozy were talking on the phone yesterday with German Chancellor Angela Merkel, according to the French president’s office, but gave no further details, Mediafax informs, quoting Reuters. A source close to the French government said Sarkozy would convene his top ministers to discuss Greece’s decision, which hit French banks especially hard.
Greece’s main opposition leader Antonis Samaras on Tuesday said after a meeting with Greek president Karolos Papoulias that he will do whatever is needed to prevent a referendum on whether Greece should go along with austerity measures in return for European loans or not. Samaras said the prime minister is blackmailing the Greeks in order to stay in power and called for immediate elections. Greek newspapers on Tuesday also harshly criticised Papandreou for his choice. “More uncertainty is the last thing that Greece needs right now,” said conservative newspaper Kathimerini in its lead editorial. “The country will certainly paralyse amid endless debates – the government, the state apparatus and institutions won’t work,” the newspaper added. Papandreou also said he would ask for a vote of confidence to secure support for his policy for the rest of his four-year term, which expires in 2013. Analysts said he was likely to win that, despite dissent among his parliamentary team, and Parliament officials said the confidence debate would begin today, with a vote on Thursday or Friday. Greece’s plan to hold a referendum on Europe’s bailout for the nation poses a threat to financial stability in the region, Fitch Ratings said.
A leader in Germany Chancellor Angela Merkel’s centre-right coalition, Rainer Bruederle, said on Tuesday he was “irritated” by Papandreou’s announcement. “This sounds to me like someone is trying to wriggle out of what was agreed – a strange thing to do,” he said. Analysts said the latest opinion poll showed a majority of Greeks took a negative view of the bailout deal. The renewed uncertainty will be likely be an embarrassment for G20 leaders in France this week trying to coax China into throwing the eurozone a financial lifeline. Meanwhile, according to MarketWatch.com, Russia’s chief presidential economic aide, Arkady Dvorkovich, said Moscow is ready to help the euro zone solve its debt crisis by providing up to USD 10 billion through the International Monetary Fund. Dvorkovich also repeated views that he is “cautiously optimistic” on the debt pact reached in Europe last week.
Nobel prize-winning economist Christopher Pissarides caught the mood of uncertainty: “It is difficult to predict what will happen to Greece if they reject it. It will be bad enough for the European Union and the eurozone in particular, but it will be far worse for Greece.
Rattle on financial markets
Analysts were divided over whether Greek voters would accept the deal, but agreed that a damaging month or two of market volatility lay ahead while pollsters repeatedly took the Greek voters’ pulse and European leaders looked on nervously. The immediate market reaction to the announcement was negative, the euro extending losses against the dollar and tumbling more than 2 pc to a session low. According to Wall Street Journal, the FTSE 100 in London opened 2.2 pc lower, the Dax in Frankfurt fell 3.5 pc and the Cac-40 in Paris dropped 3.4 pc. This came in the wake of sharp falls on Monday, when the main European indexes closed lower by around 3 pc. In Asia on Tuesday, the main indexes in Japan, Hong Kong and Australia all closed down by at least 1.4 pc. Bucharest Stock Exchange indices (BVB) decreases by more than 1 pc in the opening session on Tuesday, following the trend of European markets, Mediafax informs. After the first hour of trading, the market composite index BET-C, decreased by 1.21 pc to 2761.64 points, and BET, the most liquid shares listed, lost 1.23 pc at 4523.50 points. RON depreciation was maintained in line with regional currencies, National Bank of Romania (BNR) reference publishing of RON 4.3435/euro, the highest level in two weeks. U.S. stock futures also dropped. Futures on the Dow Jones Industrial Average fell 162 points to 11,733 and those on the Standard & Poor’s 500 index dropped 25.20 points to 1,224.10, while Nasdaq 100 futures declined 41.25 points to 2,314.50.