Greek PM drops Euro referendum plan

Published on Thursday 3 November 2011 17:59

Greece’s prime minister has abandoned his controversial plan to put a European rescue deal to a referendum.

George Papandreou opened emergency talks with his opponents, who performed a U-turn and agreed to broad austerity measures in exchange for a European bailout.

Mr Papandreou ignored widespread calls for his resignation and instead invited the opposition to join negotiations on the bailout.

He told an emergency Cabinet meeting that early elections would force Greece into leaving the euro, with disastrous effects for both Greece and other European economies.

Mr Papandreou sparked a global crisis on Monday when he announced he would put the latest European deal to cut Greece’s massive debts - an accord that took months of negotiations - to a referendum.

The idea horrified other EU nations and Greece’s creditors, triggering turmoil in financial markets as investors fretted over the prospect of Greece being forced into a disorderly default.

Two officials close to Mr Papandreou said today the referendum idea has now been scrapped, after the debt deal won support from the opposition.

Mr Papandreou spoke to conservative opposition leader Antonis Samaras in the afternoon, his office said, before a major address to his Socialist party deputies in parliament.

Speaking to his ministers, Mr Papandreou said his proposal to hold a referendum “has at least brought many people toward a rational view” of Greece’s dire economic situation. Several Greek MPs had called for a coalition unity government to approve the bailout package without a referendum, but Mr Papandreou said stepping down would make things worse.

“Elections as a solution, today and at this moment, would mean a much greater danger of bankruptcy and of course exit from the euro,” he said.

The drama in Greece sent immediate ripples throughout Europe.

Premier Silvio Berlusconi’s government in Italy was teetering as well after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout.

The European Central Bank made a surprise decision to cut interest rates by a quarter of a percentage point, to 1.25 %, in an acknowledgement of the fragility of the continent’s finances.

Talk of Greece also dominated the G20 summit in the French resort of Cannes, where the leaders of the world’s economic powerhouses gathered to solve Europe’s debt crisis, which threatens to push the world back into recession.

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wl

Thursday, November 3, 2011 at 09:07 PM

Greece should leave the Eurozone; in fact they should never have been allowed to join since they did not meet the criteria. But the politicians, mainly France and Germany, wanted them in as they thought that the Greek problems would solve themselves.

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