Tuesday, November 1, 2011

EU Shocked and Furious at Greek Referendum Plan

Spiegel
Noevember 1, 2011

Greece has stunned Europe by calling a referendum on the bailout plan agreed to by EU leaders last week. The move throws efforts to rescue the euro into doubt and heralds weeks of market turbulence ahead of the vote. A Finnish minister said Greece will in effect be voting on whether to remain in the euro.


The shock announcement by Greek Prime Minister Giorgios Papandreou of a referendum on the Greek bailout has thrown efforts to rescue the single currency into doubt, unsettled global markets and angered EU leaders just days after they agreed a wide-ranging package to contain the debt crisis.

Global stock markets fell on the news. German and French stock indices were down more than 3 percent on Tuesday, with banking shares among the main losers. The UK FTSE index slid 2.5 percent. The euro was down over 1.3 percent from Monday at $1.3735 in late morning trading.

Shares in Commerzbank, Germany's second largest bank, slumped more than 10 percent and Deutsche Bank, the country's top bank, fell almost 8 percent. One economist at Bremer Landesbank said a Greek rejection of the euro zone's plan to provide Athens with €130 billion ($178 billion) worth of aid and arrange a 50-percent write-down on its debt would be "suicide."

Papandreou, whose Socialist party has been hit by defections as it defied waves of at-times violent public protests and strikes to impose austerity measures demanded by international lenders, said he needed broader political support for the measures.

"We trust citizens, we believe in their judgment, we believe in their decision," he told ruling Socialist party deputies. "In a few weeks the (EU) agreement will be a new loan contract ... we must spell out if we are accepting it or if we are rejecting it."

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