Greek Prime Minister makes a shocking statement: he wants a referendum to decide on the fate of the foreign financial aid for his country

Alina Vasiescu (Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 3 noiembrie 2011

Greek Prime Minister makes a shocking statement: he wants a referendum to decide on the fate of the foreign financial aid for his country

The Greek government at risk of being brought down

The Greek Finance Minister was not told about the referendum

Stocks of Greek banks and the European currency drop sharply

Yesterday, Greek PM George Papandreou took the entire world by surprise, announcing that he would organize a referendum in the country and would request a vote of confidence in the Parliament on the bailout agreement passed last week at the summit of the European leaders in Brussels.

"The will of the Greek people will win", said Papandreou, before the socialist parliamentary group, adding that he would also request a vote of confidence in the parliament on the agreement concerning the Greek support.

"Do the Greeks want the implementation of the new agreement or do they reject it? If the Greeks do not want it, then it will not be enacted", the Prime Minister said.

Last week the EU leaders have reached a deal with the banks on a 50% haircut on Greek bonds, held by private lenders. The agreement involved the cancellation of 100 billion Euros out of the country"s total bond debt of 350 billion Euros.

Furthermore, Athens will receive new international loans as part of an agreement of 130 billion Euros, by the end of 2014. The program will replace the previous agreement of 109 billion Euros, which was decided in July, by the EU and the IMF.

In turn, Athens must accept a tightening of the control of its budget policy and impose strict austerity measures. This caused repeated protests of the Greek population, and last week demonstrations occurred all over the country, some of them turning violent.

The Greek PM is being criticized by the members of his own party and by the European MPs, after announcing that he would call for a referendum, taking on the risk of losing the vote of confidence in the Parliament.

Some of the members of the governing Socialist Party have requested the resignation of Papandreou, for endangering Greece"s Eurozone membership. Also, an important member of the Parliament from Papandreou"s party resigned, and two more said that the country needs a national union government, followed by early elections - which are being demanded by the opposition as well.

The European Commission was not notified of the referendum

Greece did not notify the European Commission on the plans of the Executive in Athens to hold a referendum for the foreign bailout package.

"Greece did not officially inform us. We won"t react before we have something, such as a letter or something similar from the Greek Prime Minister", a spokesperson of the Commission said.

Not even the Greek finance minister, Evangelos Venizelos, was informed about the referendum.

"Venizelos did not know about the referendum, only about the vote of confidence in the Parliament", a Greek government official said, quoted by Reuters.

Papandreou, at the G20 summit in Cannes

Greek PM George Papandreou will participate in the G20 summit in Cannes, at the end of this week, upon France"s invitation, to discuss the plan to hold the referendum.

"The prime minister will participate in the G20 reunion in Cannes, where the latest evolutions will be discussed, following an invitation from France", a Greek official said, quoted by Reuters. He mentioned that Papandreou has also talked to German chancellor Angela Merkel.

The Euro had fallen 1.5% at 09:57, on the US market, to 1.3654 dollars. Last week, it had risen above 1.40 dollars for the first time since September.

The announcement on the referendum made by the Greek PM has dramatically increased the risks for Greece and the Eurozone, according to ratings firm Fitch Ratings. The rejection of the program recently negotiated between Greece and the EU and the IMF will increase the risks of a forced and disorderly default, and for a potential Greek exit from the Eurozone, Fitch analysts say. Any alternative will have severe financial consequences, for the financial stability and the viability of the Eurozone.

"The Papandreou government is something that defies logic: it should have fallen some time ago, given the economic situation of the country", said Niall Ferguson, historian, quoted by TV station Bloomberg.

The Greek population believes that the referendum is nothing but "a scam" and says that the Government should have considered the people"s opinion before concluding the bailout agreement, instead of now.

Stefanos Manos, former Greek finance minister: "If Papandreou goes through with the referendum, we will default, and this will take us back to the drachma (ed. note: Greece"s former currency). The referendum endangers the disbursement of the next tranche of the EU-IMF loan".

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