Greek PM calls referendum on new EU aid deal

Greek Prime Minister George Papandreou on Monday called an unexpected referendum on a new EU bailout deal for his debt-ridden country, a move that could prompt snap elections if a public angry with austerity rejects the terms.

Pressured by his own lawmakers to share the heavy political burden of belt-tightening with other parties, Papandreou said he needed wider political support for the fiscal measures and structural reforms required by international lenders.

"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."

The news unleashed a storm of reaction from opposition parties, which accused Papandreou of looking for a way out for his embattled party by dragging Greece, which has seen violent clashes between anti-austerity protesters and riot police, through a lengthy period of political instability.

There had been talk of calling a referendum because of Greece's worst financial crisis in 40 years, but the fact that weary and disgruntled citizens would be asked to accept or reject the latest bailout deal came as a shock to many Greeks.

"Mr. Papandreou is dangerous, he tosses Greece's EU membership like a coin in the air," said main conservative opposition New Democracy party spokesman Yannis Michelakis.

"He cannot govern and instead of withdrawing honorably, he dynamites everything," he added.

Eurozone leaders agreed last week a second, 130-billion-euro ($180 billion) bailout for the cash-strapped country as well as a 50-percent write-down on its enormous debt to make it sustainable. Opinion polls show most Greeks view the deal negatively.

Papandreou said the referendum will ask Greeks if they agree to the deal or not and will take place in a few weeks. Finance Minister Evangelos Venizelos told Greek TV it will be held most likely early next year.

Papandreou also said he would ask for a vote of confidence to secure support for his policy for the remainder of his four-year term, which expires in 2013.

Analysts said that he is likely to win the vote of confidence, despite dissent among his parliamentary team. He was forced to expel a senior party member for voting against part of his latest austerity package and others warned it was the last time they voted for measures they did not believe in.

Parliament officials said the confidence debate will begin on Wednesday, with a vote on Thursday or Friday.


Parliamentarians questioned the referendum's legality under the constitution, which does not allow referendums on economic issues but only matters of great national importance.

The last time Greeks held a referendum was in December 1974, when they voted to abolish the monarchy shortly after the collapse of a military dictatorship.

"It's debatable whether the constitution allows such a referendum," said Fotis Kouvelis, leader of the small Democratic Left party. "The country must go to early elections. Given the situation, it's the most honorable solution."

Nearly 60 percent of Greeks view Thursday's EU summit agreement on the new bailout package as negative or probably negative, a survey showed on Saturday.

Repeated austerity measures to qualify for bailout payments under a first bailout agreement last year has led to several defections from Papandreou's Socialist party, which trails in opinion polls.

"If the referendum answer is no, Papandreou has to resign," said Costas Panagopoulos, an analyst at polling firm Alco.

"In the meantime what will happen with the decisions the EU took last week? I cannot understand what the prime minister wants to do. It could be the only way he has to leave the government, to share responsibility."

The ruling Socialists trail New Democracy in opinion polls but no party would win outright if polls were held now, forcing either coalition governments or repeat elections.

"The prime minister is obviously stuck in a dead end and he is leading the country down a very dangerous slope," said far right LAOS party MP Makis Voridis.

[Source: By Dina Kyriakidou and Harry Papachristou, Reuters, Athens, 31Oct11]

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