Mr Papandreou told a late-night cabinet meeting that the referendum will be “a clear mandate and a clear message in and outside Greece on our European course and participation in the euro.”
“The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro,” George Papandreou told the seven-hour cabinet meeting, according to a statement released by his office.
“No one will be able to doubt Greece’s course within the euro.” A Greek government spokesman said cabinet had unanimously to the referendum and that it would take place “as soon as possible”.
“The cabinet expressed its support,” said government spokesman Elias Mossialos. “The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated.”
The leaders of France and Germany, caught unawares by the high-stakes gamble, summoned the Greek prime minister to crisis talks in Cannes on Wednesday to push, before a summit of the G20 major world economies, for quick implementation of the bailout deal.
“This announcement took the whole of Europe by surprise,” French President Nicolas Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris. “The plan … is the only way to solve Greece’s debt problem.”
German Finance Minister Wolfgang Schaeuble told Wednesday’s Financial Times Deutschland newspaper he was confident the Greeks would support the government’s reforms in the referendum.
“If Greece accepts the burden and efforts required by the aid programmes, if it wants to stay within the euro zone, then we will support it,” Schaeuble said.
The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package.
Greek government spokesman Elias Mossialos said the referendum would take place “as soon as possible, right after the basics of the bailout deal are formulated”, but would not be drawn on whether that meant before Christmas.
Opinion polls suggest most voters think it is a bad deal, but much will depend on how Papandreou frames the debate, either on the bailout — and hence the painful cuts that will follow — or membership of the euro, which remains popular.
Mr Papandreou needs 151 votes to enact the referendum. If any of the dissenters votes against, it cannot be held. “He is blackmailing us,” said Yannis Aggelou, a 50-year old sales manager at a steel company.
Papandreou’s most immediate hurdle is the parliamentary confidence vote on Friday. Lawmakers begin debating at 1600 GMT on Wednesday.
“We believe the government will once again win a vote of confidence in order to proceed with its plans,” government spokesman Angelos Tolkas told reporters. “We will not back down on anything we have to do to save the country.”
Last week Eurozone leaders thrashed out Greece’s second financial rescue since last year, in return for yet more austerity, in the hope that it would ease uncertainty surrounding the future of the 17-nation single currency.
Instead, financial markets suffered another bout of turmoil on Tuesday due to the new political uncertainty and the risk that austerity-weary Greeks could reject the bailout. Opinion polls suggest most voters think it is a bad deal.
The euro fell almost half a US cent to a session low of $1.3647 after Mr Papandreou’s latest remarks, showing that he had failed to ease market worries about the region’s debt crisis.
Greece is due to receive an 8 billion-euro IMF/EU aid tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there is a “no” vote.
Dutch Finance Minister Jan Kees de Jager said the IMF might have difficulty paying out that tranche because of the looming referendum. “I can imagine it will be difficult for the IMF to decide about the tranche but there will be uncertainty … it is problematic,” he told the Dutch parliament. [via Reuters and The Telegraph]