Quantcast

Greek government teeters over bailout referendum

By Nicholas Paphitis

Associated Press

Published: Thursday, Nov. 3 2011 3:40 a.m. MDT

An EU and a Greek flag are for sale as tourists walk in Plaka district of central Athens on Wednesday, Nov. 2, 2011. Greek Prime Minister George Papandreou will try to win over irate European leaders later Wednesday, hours after persuading his cabinet to back a hugely-controversial referendum on the debt-crippled country's latest rescue package.

Petros Giannakouris, Associated Press

ATHENS, Greece — Greece's embattled Socialist government was on the point of imploding Thursday as a revolt against Prime Minister George Papandreou's planned referendum on the country's hard-won international bailout package gathered pace.

Several ministers and lawmakers called for an emergency meeting of the governing Socialists in parliament, where Papandreou has convened a cabinet session for noon.

The meltdown started after Finance Minister Evangelos Venizelos broke ranks with him on the referendum proposal, which horrified Greece's international partners and creditors, triggering turmoil in financial markets as investors fretted over the prospect of a disorderly debt default and the country's exit from the eurozone.

Alongside his referendum pledge on Monday, Papandreou said his government would face a confidence vote on Friday. With open rebellion among his ranks, it's unclear whether it can survive that long and many in Greece are calling on the establishment of a national unity government, incorporating the opposition.

Earlier Thursday, Socialist lawmaker Eva Kaili also said she would not support the government in the confidence vote. Without her support, the Socialists hold a single seat majority in the 300-member parliament.

"Right now, the country is headless," conservative opposition New Democracy party spokesman Yiannis Mihelakis said.

Finance Minister Venizelos said the country's attention should be focused on getting a crucial installment of bailout funds quickly, which has been delayed because of Papandreou's decision to back a referendum into a bailout package agreed just a week ago.

"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt," Venizelos said in a statement issued shortly after his return from Cannes in the early hours of Thursday, where he accompanied Papandreou.

Venizelos said Greece's participation in the eurozone and EU membership "cannot depend on a referendum" and that the next installment should be disbursed "without any distractions or delay."

Although he had defended Papandreou's decision to hold a referendum in a speech delivered immediately after the premier's announcement on Monday, an official close to the minister has said Venizelos had not been told in advance that Papandreou was to announce a public vote.

On Wednesday, French and German leaders told Papandreou any referendum should be on whether Greece wants to stay in the eurozone or not, adding that Athens would not get critical bailout funds until after the vote.

An initial date of Dec. 4 has been suggested for the vote. But Greece has said that without the next €8 billion installment of its existing bailout fund, the country runs out of funds in mid-November.

Greece's new debt deal would give Greece an extra €100 billion ($138 billion) in rescue loans from the rest of the eurozone and the IMF — on top of the €110 billion it was granted a year ago — and would see banks forgive Athens 50 percent of the money it still owes them.

Other ministers and governing Socialist party deputies distanced themselves from the prime minister's referendum idea.

Development Minister Michalis Chrisohoidis issued a statement calling for unity, and saying the priority was for parliament to ratify the new debt deal.

"There can be no... return to the drachma and the past," Chrisohoidis said. "We must all assume our responsibilities."

Speaking in Cannes, Papandreou said he was forced to call the referendum after it became clear there was no "broad support" from opposition parties for the bailout deal reached with the rest of the eurozone and big banks just a week ago.

Turning the referendum into a popular vote on whether Greece wants to remain in the eurozone is a risky bet that could lead to turmoil throughout the bloc.

"We cannot permanently ride a rollercoaster on Greece; we have to know where things are going, and the Greeks have to tell us where they would like things to go," Jean-Claude Juncker, the Luxembourg prime minister who chairs eurozone finance ministers' meetings, told Germany's ZDF television Thursday.

"I am very decidedly of the opinion that everything must be done so that one euro country does not leave the 17 — but if that were the wish of the Greeks, and I would find that wrong, we cannot force the Greeks," he added.

"If the Greeks make clear via a referendum that they would feel better outside the eurozone than inside the eurozone, then this is a Greek decision, then our Greek friends have to describe the way by which they want to get out of the eurozone," Juncker said.

In case Greece does leave, Juncker said Europe has to make plans so other eurozone countries don't suffer.

"We are absolutely prepared for the situation that I have described and do not want to see come about," Juncker said. "This is not just about Greece, it is also about possible dangers of contagion for others, and we will do everything ... to arrange the firewalls against the danger of contagion in such a way that the eurozone as a whole does not skid."

____

Associated Press writer Geir Moulson in Berlin contributed.

Get The Deseret News Everywhere

Subscribe

Mobile

RSS