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Archive for Friday, November 4, 2011

Greek P.M. abandons referendum on debt plan

November 4, 2011

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— Greece’s prime minister abandoned his explosive plan to put a European rescue deal to popular vote Thursday, keeping his government alive — but passionate squabbling in Athens left the country’s solvency in doubt and the eurozone in turmoil.

Prime Minister George Papandreou reversed course after a rebellion within his own Socialist party over the referendum, but ignored repeated calls to resign and call elections.

Chaos persisted in the country that coined the term: Papandreou faces a critical vote of confidence in his government today as the Socialist rebellion still simmers. And the main opposition conservatives were not placated, insisting on his resignation.

Meanwhile, Greece’s cost of borrowing ballooned, with the interest demanded by markets to buy Greek 10-year bonds exceeding 31 percent — compared to 2 percent for European powerhouse Germany.

Papandreou sparked a global crisis Monday when he announced he would put the latest European deal to cut Greece’s massive debts — a hard-fought accord that took months of negotiations — to a referendum. The idea horrified other EU nations, Greece’s creditors and financial markets as investors fretted over the prospect of Greece being forced into a disorderly default.

Papandreou was summoned to an emergency European meeting in Cannes, France, on Wednesday night, where the visibly irate French and German leaders said any referendum would in fact be a question of whether Greece retains its cherished membership of the 17-nation euro common currency. They also put on hold the next, vital payout of Greece’s existing bailout until after a vote was held.

A Greek Finance Ministry official told the AP that Greece has cash until mid-December. After that, without the €8 billion ($11 billion) disbursement, Greece would most likely be unable to service its debt or pay pensions and salaries.

Finance Minister Evangelos Venizelos accompanied Papandreou to the Riviera but led a revolt against the referendum idea on his return to Athens before dawn Thursday.

With Greece’s euro membership and bailout loan lifeline suddenly in danger, pressure mounted for Papandreou to resign. The conservative opposition and even his own deputies called for the creation of a transition government to pass the new European debt deal.

Venizelos said, as the opposition now indicated it would support the European debt deal, a referendum was no longer necessary.

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