Greek move for bailout referendum returns Europe to crisis mode

by Henry Chu and Anthee Carassava

Los Angeles Times
November 1, 2011

Europe's latest plan to claw its way out of a monumental debt crisis lies in grave doubt less than a week after being cobbled together, following a shocking move to put the accord to a popular vote in Greece that threw both the government there and financial markets around the world into turmoil.

Confounded officials, analysts and investors were left struggling to divine what they saw as Greek Prime Minister George Papandreou lobbing a grenade into Europe's attempts to keep his country afloat by calling for a referendum on the new rescue package. Dismayed French and German leaders summoned Papandreou to an emergency meeting Wednesday in Cannes, France, in advance of the Group of 20 summit there this week.

Europe's leaders had hoped to use the gathering to tout their new agreement to boost their bailout fund and write down 50% of Greek debt held in private hands. But the plan is now in danger of emerging stillborn, increasing the prospects that Greece might undergo a chaotic default and that the debt crisis could reverberate through the big economies of Italy and Spain, possibly setting off another global recession.

More