Greek PM convinces cabinet to push referendum deal ahead

9:16 PM ahead, cabinet, convinces, Greek, referendum No Comments

ATHENS — Greek Prime Minister George Papandreou fought off a barrage of criticism to win the backing of his cabinet Wednesday to push ahead with a referendum the government said would take place as soon as possible on a European Union debt bailout deal.

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Some of his party lawmakers called for him to quit for jeopardizing Greek euro membership with his shock decision to call a popular vote, a move that pummeled the euro and global stocks, but the cabinet support at least gives him a stay of execution before a confidence vote in parliament Friday.

"The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro," Papandreou told the seven-hour cabinet meeting, according to a statement released by his office.

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"No one will be able to doubt Greece's course within the euro."

After the apparent show of unity at home, Papandreou will later face the leaders of France and Germany, who summoned him for crisis talks in Cannes, before a G20 summit of major world economies, to push for quick implementation of the bailout deal.

Whatever the result of the referendum, Papandreou's gamble guarantees long weeks of uncertainty just when the 17-nation currency area was desperate for a period of calm to implement remedies agreed last week to overcome its sovereign debt crisis.

"This announcement took the whole of Europe by surprise," French President Nicolas Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris. "The plan ... is the only way to solve Greece's debt problem."

Japan's finance minister, Jun Azumi, echoed his comments, as the Nikkei share average fell as much as 2 percent Wednesday. "Everyone is bewildered," he said.

Timing, result unpredictable
Greek government spokesman Elias Mossialos said the referendum would take place "as soon as possible, right after the basics of the bailout deal are formulated," but would not be drawn on whether that meant before Christmas.

With so much of the detail of the deal to keep Greece afloat still to be nailed down, the vote seems unlikely to take place before the end of the year and Greek officials said on Monday it was likely in mid-January.

Opinion polls suggest most voters think it is a bad deal, but much will depend on how Papandreou frames the debate, either on the bailout -- and hence the cuts that will follow -- or membership of the euro, which remains popular.

German Finance Minister Wolfgang Schaeuble told Wednesday's Financial Times Deutschland newspaper he was confident the Greeks would support the government's reforms in the referendum.

"If Greece accepts the burden and efforts required by the aid programs, if it wants to stay within the euro zone, then we will support it," Schaeuble said.

Papandreou said Greece's partners would support its policies and urged the G20 meeting in Cannes to agree policies that "make sure democracy is above market appetites."

But his move is bound to embarrass G20 host Sarkozy as he tries to coax big emerging nations such as China into throwing the euro zone a financial lifeline by investing an expanding bailout fund.

It could also further undermine dwindling political support in northern Europe for aiding Greece.

The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package.

Confidence vote
Papandreou's most immediate hurdle is the parliamentary confidence vote Friday.

"We believe the government will once again win a vote of confidence in order to proceed with its plans," government spokesman Angelos Tolkas told reporters. "We will not back down on anything we have to do to save the country."

Six senior members of Greece's ruling PASOK socialists, angered by Papandreou's decision to call a plebiscite on the 130 billion euro rescue package, said he should make way for a "politically legitimate" administration.

During the cabinet meeting that wrapped up around 3 a.m. after seven hours, some ministers questioned the timing of the referendum and criticized the fact they had been kept in the dark -- even the finance minister had not been told -- and a handful were openly against it, government sources said.

"I think this was the wrong decision and we must take it back," one minister was quoted as saying. "We must not risk our position in the euro."

A leading PASOK lawmaker earlier quit the party, narrowing Papandreou's slim majority to 152 of 300 seats, and several others called for a government of national unity followed by a snap election, which the opposition also demanded.

Papandreou needs 151 votes to enact the referendum. If any of the dissenters votes against, it cannot be held, and there is still plenty of dissent.

"For the first time we are admitting publicly that our policy lacks legitimacy," one minister said he told the meeting, speaking to reporters on condition of anonymity.

Shares pounded
Doubt about Europe's ability to contain the debt crisis has once more sent investors fleeing from riskier assets across the world. Asian shares fell and the euro hovered near three-week lows against the dollar Wednesday.

U.S. stocks tumbled more than 2.5 percent and European shares posted their biggest one-day loss in more than a month Tuesday.

The risk premium on Italian bonds over safe-haven German Bunds hit a euro-lifetime high Tuesday, raising Rome's borrowing costs to levels above 6 percent that proved unsustainable for Ireland and Portugal.

European bank shares dived on fears of a disorderly Greek default and the Athens Stock Exchange suffered its biggest daily drop since October 2008, with the general index shedding 7.7 percent.

Greece is due to receive an 8 billion-euro IMF/EU aid tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there is a "no" vote.

Dutch Finance Minister Jan Kees de Jager said the IMF might have difficulty paying out that tranche because of the looming referendum. "I can imagine it will be difficult for the IMF to decide about the tranche but there will be uncertainty ... it is problematic," he told the Dutch parliament.

Copyright 2011 Thomson Reuters.

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Greece gambles on referendum for new debt deal

9:35 PM gambles, Greece, referendum No Comments

ATHENS, Greece — Taking a huge political gamble, Greece's prime minister announced Monday that his debt-strapped country will hold a referendum on the new European debt deal reached last week — the first such vote in 37 years.

Prime Minister George Papandreou appeared to take many lawmakers by surprise by saying that a hard-bargained agreement that took months for Europe's leaders to hammer out will be put to a public ballot.

He gave no date or other details on the proposed referendum, which would be the first in Greece since 1974, when the monarchy was abolished by a landslide vote months after the collapse of a military dictatorship.

"This will be the referendum: The citizen will be called upon to say a big 'yes' or a big 'no' to the new loan arrangement," Papandreou told Socialist members of parliament. "This is a supreme act of democracy and of patriotism for the people to make their own decision ... We have a duty to promote the role and the responsibility of the citizen."

The move allows Socialist lawmakers — who have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over rounds of austerity measures — to pass the responsibility for the country's fate to the Greek people themselves.

Finance Minister Evangelos Venizelos, a constitutional law professor, said the referendum was called after opposition parties repeatedly failed to side with the government in negotiations between Greece and other eurozone members.

"Greece is living through a drama, from which it must be released by asking the people to express its will," Venizelos told parliament.

"Each citizen will make his own decision, with responsibility, in a process that will provide a national sense of relief and recovery."

Later he told private Antenna television: "It is very clear: The new agreement will be submitted to parliament for approval and then submitted to the judgment of the Greek people ... the Greek people can of course say 'no' but must bear in mind the consequences of that decision."

Venizelos indicated the referendum would be held early next year, after weeks of complex negotiations to finalize details of the new agreement.

The new debt deal aims to seek 50 percent losses for private holders of Greek bonds and provide the troubled eurozone member with €100 billion ($140 billion) in additional rescue loans.

Papandreou's government has seen its majority reduced to just three seats in parliament and its approval ratings plummet amid harsh austerity measures that are sending the country into a fourth year of recession in 2012.

The EU statistics agency Eurostat estimated in a report issued Monday that unemployment in Greece reached 17.6 percent in July — even higher than the Greek estimate for that month of 16.5 percent.

"This is just the latest twist in the unfolding Greek tragedy," said Sony Kapoor, managing director of Re-Define, a London-based think tank.

"With an irresponsible opposition that is promising Greek voters the moon, it is very difficult to see how this referendum could be won under the ongoing gut-wrenching austerity."

Eurozone countries struggled for months to overcome their differences before reaching the Oct. 26 agreement — the second broad agreement reached in four months — and it is likely to cause major concern for EU officials.

Germany's Finance Ministry noted late Monday that "the summit of the eurozone's heads of states and governments last Wednesday formulated clear expectations. Accordingly, the second aid package for Greece shall be finalized by year's end."

"At the moment we are all working on this with high intensity," it said in a statement.

But it declined to comment directly on the ballot, saying "the announcement of a referendum is a development in Greece's domestic politics on which the (German) government has no information yet."

British Foreign Secretary William Hague said the referendum was "a matter for the Greeks."

"Every country needs to have their own domestic political approach to the problems ... The consequences of a 'yes' or 'no' vote are something that will have to be debated in Greece," Hague told Channel 4 News.

"We look to all the countries in the eurozone to honor the agreements they have entered into."

In Greece, opposition parties accused the government of calling the vote to save its teetering government, threatened by growing dissent from Socialist dissenters.

"The prime minister is trying to buy time," said Costas Gioulekas of the conservative New Democracy party said. "We want clear solutions. And a clear solution is obvious: Elections."

Under Greece's constitution, a referendum requires approval by parliament before it is officially declared by the country's president. Gioulekas would not say whether his party would back a "yes" vote.

Support for the Socialists has eroded so much that anti-government protesters forced authorities Friday to cancel an annual military parade to honor World War II veterans, causing deep embarrassment to the government.

__

Elena Becatoros from Athens, Juergen Baetz in Berlin, Gabriele Steinhauser in Brussels and Jill Lawless in London contributed.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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