Politics over Reality – Greece calls for Referendum on EU Bailout

European markets plunged as Greece’s Prime Minister Papandrou, who agreed to the EU bailout deal last Wednesday, tossed a coin by calling for a referendum on Europe’s bailout plan.  The move puzzled investors and European leaders alike.   While, after analysis, the EU rescue would in all likelihood only delay Greece’s default, this move by the Prime Minister has investors looking at the motive.  Papandrou faces a confidence motion on Friday.s

The German government in Berlin has announced that there would be a pre G20 special summit in Cannes, France on Wednesday to discuss the new developments.   German Chancellor Angela Merkel will be holding a teleconference with Nicola Sarkozy of France,  prior to the summit, to discuss the crisis,  Die Welt on line reported. 

Papandrou stunned investors, his citizens and European leaders in his decision to hold a referendum on the deal, which he called a supreme act of democracy.  Markets soared last week after Europe brokered a deal, which would forgive 50% of Greece’s debt.  This enthusiasm was short lived and analysts soon wondered if the deal would do much more.  but delay the inevitable default by Greece.  Austerity measures have been very unpopular in Greece and protests have opposed the measures for month, some ending in violence.  Eurozone leaders agreed last Thursday that private holders of Greek bonds should take a 50 per cent loss on their holdings, reducing Greece’s debt burden to 120 per cent of national income by 2020 from around 180 per cent at present.

The Greek public is reluctant to give up lucrative entitlements, to say the least.  The overwhelming debt has resulted in a lowered standard of living and has resulted in the cutting of programs bu the socialist government.  The medicine is hard to take.  While Popandrou agreed to the Eurozone deal, he would have had problems selling it to his public.  If his government gets defeated in Friday’s confidence motion, it is not likely that an election will return stability to Greece, however it will delay the referendum for now.

The referendum appears to be political suicide on part of Papandrou.  His Finance Minister reported to hospital on complaints of stomach pain.  Could it be that the Greek Prime Minister is looking for a way out?  The move is odd and could inevitably result in a meltdown of the European banking system.

Michael Hewson, markets analyst at CMC Markets, said “The resulting fallout could well result in a complete meltdown of the European banking system and throw Europe into turmoil.”

Back to the drawing board for European leaders.  What happens in Europe will affect the remainder of the globe.

ATHENS — Markets plunged Tuesday on fears that Europe’s plan to save the euro was already unraveling after the shock decision by Greek Prime Minister to call a referendum on the country’s latest rescue.Stock markets plunged across Europe on Tuesday, with the Athens exchange losing almost 7 per cent, while the euro fell another 1.2 per cent, on worries the Greek government could lose the referendum vote with the potentially devastating consequence of a disorderly debt default and Greece’s exit from the common currency.George Papandreou stunned investors, as well as his own citizens and his partners in the eurozone, by announcing late Monday that a plebiscite will be held in what he called “a supreme act of democracy and of patriotism for the people to make their own decision.” A confidence vote in the Socialist government will also take place at the end of this week.

via Markets plunge on Greek referendum – CTV News.

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Karl Gotthardt - Politisite Managing Editor Maj. Gotthardt is a Retired Military Officer with 35 years service in the Canadian Armed Forces. He spent most of his time in the Military in Infantry Battalions. Karl took part in training for Afghanistan as an Operator Analyst with the Canadian Maneouvre Training Centre. Karl is a qualified military parachutist and military free fall parachutist. He earned his U.S. Master Jump Wings in Fort Benning, Georgia. Karl enjoys working with horses for the last 24 year. He owns six. He has experience in breeding, training and of course riding.Karl was born in Germany and is fluent in both English and German and he speaks enough French to "get in trouble". Karl has written or writes at NowPublic, All Voices, Tek Journalism and many others.

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