By Maria Petrakis, Natalie Weeks and Marcus Bensasson - Nov 2, 2011 7:04 PM GMT+0700
Nov. 2 (Bloomberg) -- Daniel Speckhard, a former U.S. ambassador to Greece, discusses the Greek debt crisis and the outlook for Prime Minister George Papandreou's leadership. Papandreou triggered the latest upheaval in the two-year-long debt crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on Europe's bailout. Speckhard speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
Greek Prime Minister George Papandreou stuck to plans to hold a referendum on Europe’s rescue package to confirm the nation’s membership of the euro amid signs his government may collapse.
“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.” The Cabinet voted unanimously to endorse the plan.
Papandreou flies to France today to face European leaders surprised by his decision to put the bailout plan to a national vote and call a confidence vote in parliament. His grip on power weakened after a lawmaker from his socialist Pasok party defected, leaving him with 152 deputies in the 300-seat chamber, while another, Vasso Papandreou, called for the formation of a national unity government.
Another four lawmakers have criticized 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.
Antonis Samaras, head of the biggest opposition party, New Democracy, told his deputies in the Greek Parliament today that elections were imperative.
“Papandreou put the country at the epicenter of a global storm for his own interests,” Samaras said in a speech televised live on state-run NET TV. “We are at the point where his own lawmakers are telling him to leave and he remains.”
‘Yes or No’
Papandreou didn’t say what the exact question in the referendum would be.
“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 erased a decline of as much as 0.5 percent against the dollar after Papandreou’s Cabinet backed his proposal. The currency was at $1.3771 per dollar at 1:19 p.m. in Athens, having earlier traded as low as $1.3637.
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 rejection by a referendum would spark a disorderly default and call into doubt Greece’s membership of the euro.
Venizelos Leaves Hospital
Government spokesman Elias Mosialos told reporters in Athens after the meeting the referendum would be held “as soon as possible.” Finance Minister Evangelos Venizelos is being discharged from a one-day hospital stay to accompany Papandreou to Cannes, a ministry official said.
“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.
Talks in Cannes
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. Merkel, Sarkozy and Draghi will meet at 6 p.m. local time in Cannes and be joined by Papandreou three hours later, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker said.
The 6 p.m. meeting will also be attended by 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).
Germany Seeks Assurances
A German lawmaker from Merkel’s Christian Democrats, Wolfgang Bosbach who heads parliament’s interior-affairs committee, said he “can’t imagine” that the next bailout tranche for Greece will be disbursed without assurances that the country meets its commitments under the aid plan.
“Solidarity can’t just mean that we pay and accept liabilities for Greece, solidarity must also mean that Greece, the country that receives aid, meets its commitments,” Bosbach said on Germany’s ZDF public television.
Greek officials will also have to outline to international officials in the coming weeks how they will secure a seventh round of funding. 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.
To contact the reporters responsible for this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net
To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net; Tim Quinson at tquinson@bloomberg.net
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