Greece Prime Minister George Papandreou made a surprise announcement on Monday to place Europe’s new rescue agreement for Greece up to a referendum vote in Greece. His decision has cast new doubts about the stability of the European Union to adequately manage Greece’s mounting debts while steering the debt burdened country towards a fiscal policy consisting of austerity measures and higher taxes.
Deciding to hold a referendum vote in Greece has renewed fears that Greece may decide to outright reject the austerity measures which the country reluctantly agreed to follow at the urging of the European Union.
If Greeks vote to reject Europe’s rescue package and austerity measures, the outcome could lead to a disorderly Greek default and a potential withdrawal from the European Union.
“Let us all the people to have the last word, let them decide the country’s fate” Papandreou said. Finance Minister Evangelos Venizelos told Greek TV reporters on Monday that the referendum vote would likely be held early next year in January.
Prime Minister Papandreou will also be facing a parliamentary confidence vote on Friday. His Socialist Party is facing mounting criticism from oppositional parties.
To complicate matters even further, opposition parties in Greece are asking for a new election rather than a new referendum. The last time Greece held a referendum was in December 1974, when a vote was taken to abolish the monarchy following the collapse of a military dictatorship.
In a recent poll taken by Vima Newspaper over the week-end, 46 % of Greeks said that would vote against the acceptance of Europe’s new rescue agreement.
Bloomberg announced early this morning that Pimco CEO Mohamed El-Erian sent an e-mail stating, “It is worrisome that Thursday’s European deal already appears to be unraveling from many sides.”
The Euro fell 2% to 1.38 after the news was announced on Monday.
*****Correction**** from yesterday’s article:
1.4 trillion from the European Rescue Fund instead of the first published amount of 1.4 billion.