Greek Premier Pledges Vote in December on Debt Deal

Prime Minister George A. Papandreou of Greece emerged from a meeting with Europe’s leaders here on Wednesday pledging to hold a referendum on a new European debt deal on Dec. 4 or 5.

Mr. Papandreou expressed confidence that the Greek people would back a referendum, though he did not specify what question would be posed. Photo: Flickr

George Papandreou, the Greek prime minister, met his French and German counterparts ahead of today’s G20 summit of world leaders.

Papandreou was summoned to Cannes on the eve of the summit and given a stark warning by French President Nicolas Sarkozy and German Chancellor Angela Merkel, both clearly angered by his gambit, which has sent global stock markets and the euro currency spiraling lower.

Merkel and Sarkozy, as leaders of the two biggest eurozone economies, held emergency talks with Greek Prime Minister George Papandreou in Cannes, France to discuss his stunning proposal to hold the vote. The discussion also included International Monetary Fund head Christine Lagarde and top EU and eurozone officials.

Luxembourg Prime Minister Jean-Claude Juncker announced that the referendum would be held Dec. 4, though Sarkozy said the vote would be Dec. 4 or 5.

Nicolas Sarkozy, the French president and Angela Merkel, the German Chancellor, said no funds from either Europe or the International Monetary Fund (IMF) would be made available until Greece had accepted the austerity programme.

At a press conference Mr Sarkozy said: “Our Greek friends must decide whether they want to continue the journey with us.

“We cannot commit European taxpayers’ money unless the rules unanimously adopted in Brussels are respected to the letter.”

“The referendum … in essence is about nothing else but the question, does Greece want to stay in the eurozone, yes or no?” German Chancellor Angela Merkel said at a news conference.

Sarkozy said the next euro8 billion ($11 billion) installment of Greek rescue loans, which had already been approved and was due to be paid in November, will not be handed over until after the referendum.

“We want to continue with the Greeks but there are rules and it’s unacceptable that these rules are not followed,” Sarkozy said.

The two leaders also said that no more aid would be given to Greece until after the referendum. This would include the next $11 billion installment of aid; Greek officials have said that without the additional funds, the country will run out of money by mid-December.

A “no” vote in the referendum would have enormous consequences not just for Greece but for the rest of Europe. It could break up the 17-nation eurozone, lead Greece to a disorderly debt default, topple many fragile European banks and send the global economy spinning back into recession.
“We will not implement any program by force, but only with the consent of the Greek people,” Papandreou told his Cabinet, according to a text of his remarks that was released to the public.

“This is our democratic tradition and we demand that it is also respected abroad.”

He said that any referendum will have “a clear mandate” and will give a sense of how the Greek people view their future in the European Union.

“The dilemma is not ‘this government or another one,’ the dilemma is ‘yes or no to the agreement,’ ‘yes or no to Europe,’ ‘yes or no to the euro,'” Papandreou said.

An IMF source said: “The [IMF] board would not want to give money to Greece and then wonder what will happen. The board will want comfort that Greece will fulfil its commitments and right now Papandreou is unable to give that.”
“The referendum adds a further layer of complexity and uncertainty to an already complex crisis,” said Domenico Lombardi, a former IMF executive board member who is now a senior fellow at the Brookings Institution in Washington.

“Most importantly, it starts off a political mechanism that could eventually result in Greece leaving the euro.”

Papandreou’s stunning announcement Monday that he would stage a referendum roiled world financial markets and threw into question an ambitious and costly European deal worked out in torturous negotiations a week ago.

Merkel confirmed that Greece did not inform the rest of the eurozone about the referendum. “This did not happen in a coordinated fashion,” she said.

But Papandreou defended his decision to call the vote despite the wrath it invoked.

“I believe it’s crucial that we show the world that we can live up to our obligations,” he said. “This is not a question only of the program, this is a question of whether we want to remain in the eurozone.” [via The Telegraph, Reuters, The New York Times, CTV and Fox News]

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