Greece to hold referendum on Europe debt deal

Greek Prime Minister George Papandreou is not normally the gambling type.

Yet in the political equivalent of an all-in bet at a high-stakes poker match, the beleaguered leader said Monday that he would ask Greek voters to determine whether to agree to a new, hard-bargained European deal to help the financially strapped country get out of debt.

“This referendum will be a supreme act of democracy and of patriotism,” Papandreou said, apparently catching many lawmakers by surprise. “The [Greek] citizen will be called upon to say a big ‘yes’ or ‘no’ to the new loan arrangement.”

But asking voters to support harsh austerity measures that were part of a painstakingly crafted bargain with Greece’s creditors casts uncertainty over the country’s ability to meet its part of the deal.

Greece is facing the possibility of a devastating default that could imperil the fate of Europe’s single currency, shatter global markets and get the country evicted from the 17-nation Eurozone.

The announcement came as Athens faces delicate negotiations with its European peers over the details of a debt-and-loan agreement reached last week. European leaders squabbled for months over how to deal with troubled economies like Greece, and stem the spread of the continent’s debt crisis.

The European deal calls for private banks to take a 50% write-down on the value of Greek bonds they hold in exchange for a $140-billion bailout loan to Athens — the second bailout stitched together by the European Union and the International Monetary Fund in a year.

Angelos Tolkas, a government spokesman, said details involving a referendum were under review. It would be the first such public ballot in Greece since 1974, when voters decided to abolish the monarchy after a brutal military dictatorship.

“It will most likely take place in January and it will be binding,” Tolkas said.

Under the constitution, a referendum requires parliamentary approval before it is officially declared by the country’s president. It also requires 40% voter participation for the outcome to be valid.

With the country entering its fourth year of recession, Papandreou’s socialist PASOK government has seen its popularity plummet since surging to power in 2009. Reluctance, even outright resistance, from some in the party concerned about the effect of unrelenting austerity measures has left the socialists clinging to power with a razor-thin, three-seat majority in Parliament.

A poll published in the To Vima weekly newspaper over the weekend showed 6 in 10 Greeks opposing last week’s rescue deal, many fearing more cutbacks in wages and jobs. Still, 54.2% supported the idea of a referendum, while 40% believed Parliament should decide whether the deal makes sense for Greece.

Whispers about a referendum had been heard for weeks. Still, Papandreou surprised opposition rivals, and even some of his aides.

Members of the Communist Party referred to the move as blackmail. Rival conservatives said Papandreou was dangerous, with New Democracy party spokesman Yannis Michelakis saying that instead of “withdrawing honorably, [Papandreou] dynamites everything.”

Senior government officials said Papandreou could push the agreement through Parliament should the public knock down the debt deal in the referendum.

Whatever the contingency plan, Christopher Pissarides, a Nobel economics laureate, told Sky News, “a rejection [of the European deal] will be disastrous.”

“Greece will default immediately,” Pissarides said, “and I can’t see them staying in the euro having rejected such a vital EU plan.”

Carassava is a special correspondent.