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Papandreou: Bailout Referendum to Confirm Greece in Euro

Wednesday, 02 Nov 2011 09:34 AM

Greek Prime Minister George Papandreou said a referendum on Europe’s rescue package will confirm the nation’s membership of the euro as he stuck to plans to hold the vote amid domestic political turmoil.

“The referendum will be a clear mandate and strong message within and outside Greece on our European course and our participation in the euro,” Papandreou told his ministers in Athens early today, according to an e-mailed transcript. It will “ensure this course in the most decisive way.”

Papandreou will fly to Cannes today to face European leaders surprised by his decision to put the bailout plan to a referendum and call a confidence vote in parliament. His grip on power has weakened after one lawmaker from his socialist Pasok party defected, leaving him with 152 deputies in the 300-seat chamber, while another, Vasso Papandreou, called on the Greek president to move toward forming a national unity government.

Another four lawmakers have criticised the plans for the referendum, stopping short of defection, and six members of the party called on the premier to resign in a joint letter, Athens News Agency said yesterday. Opposition parties have ramped up calls for elections.

“The dilemma isn’t ‘this or another government,’” Papandreou said. “The dilemma is ‘yes or no to the loan accord’, ‘yes or no to Europe’, ‘yes or no to the euro.”

The euro declined against the dollar on concern Papandreou’s pledge to put the bailout package to a referendum risks a disorderly default if rejected. The currency was down 0.3 percent today at $1.3664 as of 12:10 a.m. in London.

Referendum Risk

Papandreou’s decision to seek the support of Greek voters is a fresh challenge to a European Union-led bailout agreed last week that involves a 50 percent writedown on Greek debt and further austerity measures in that country. The risk is that a rejection of a referendum would spark a disorderly default and call into doubt Greece’s membership of the euro.

“Every day in dealing with the Greek deal is like getting on the Coney Island rollercoaster,” Charles Dallara, managing director of the Institute of International Finance, said on the BBC’s Newsnight program. “You take some sharp turns, they’re unexpected, and it rattles you around a little bit but then it settles out and you have to move forward and that’s what we’ve had to do in the past 36 hours or so. We remain focused on this deal.”

Papandreou, 59, wants to hold the referendum after details of last week’s second bailout package for Greece are approved. The vote of confidence in Parliament is currently scheduled to begin today and to conclude at the end of this week.

Cannes Meeting

Papandreou will travel to Cannes, France today to brief German Chancellor Angela Merkel, French President Nicolas Sarkozy and European Central Bank President Mario Draghi and other officials on developments in the country.

They will be joined by Luxembourg Prime Minister Jean- Claude Juncker, European Commission President Jose Manuel Barroso, International Monetary Fund Managing Director Christine Lagarde and EU Monetary Affairs Commissioner Olli Rehn.

The new round of political turmoil throws into doubt Greece’s ability to access the emergency funding that’s keeping its finances afloat. The IMF’s Executive Board was due to meet in mid-November to decide on paying its part of the sixth bailout tranche, which is worth a total of 8 billion euros ($11 billion).

Funding Test

Greek officials will also have to outline to international officials in the coming weeks how they will secure a seventh round of funding. Finance Minister Evangelos Venizelos said the government needs to impose “rescue measures” to secure “the long-term sustainability of Greek public debt.” Greece has a 14.4 billion-euro bond maturing in March, Bloomberg data shows.

Papandreou’s confidence isn’t borne out by opinion polls. Most of the 1,009 people surveyed on Oct. 27, the day the new bailout package was announced, said the accord should be put to a referendum, according to the results of a Kapa Research SA poll, published in To Vima newspaper.

Forty-six percent said they’d oppose the plan at such a referendum. In the same poll, more than seven in 10 favored Greece remaining in the euro.

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Greek Prime Minister George Papandreou said a referendum on Europe s rescue package will confirm the nation s membership of the euro as he stuck to plans to hold the vote amid domestic political turmoil. The referendum will be a clear mandate and strong message within and...
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2011-34-02
Wednesday, 02 Nov 2011 09:34 AM
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