Fears as Greek PM promises referendum on bailout

 
Tim Wallace
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GREEK voters will be able to reject the bailout of their country by voting in a referendum, Prime Minister George Papandreou said last night.

“The command of the Greek people will bind us,” he announced. “If the Greek people do not want it, it will not be adopted.”

Papandreou intends to use the poll as a confidence vote on his government. If the rescue plan is rejected, the government is likely to fall and new elections would take place.

Protests and a general strike caused Greece to grind to a halt less than two weeks ago, after the government voted through new austerity measures, required to obtain the latest tranche of bailout funds, by a slim majority. Over 100,000 people filled the streets around parliament at the time, and the government has struggled to prevent disruption since then.

The latest deal agreed in Brussels includes a voluntary 50 per cent haircut on privately held government bonds, helping reduce Greek debt to 120 per cent of GDP by 2020.

The summit also announced that bailout funds up to 2014 now amount to €130bn (£112bn), including bank recapitalisation.

A poll published in Greek newspaper To Vima on Saturday found 46 per cent would vote “no” in a referendum. However, over 70 per cent said they want to stay in the Eurozone.

“Papandreou’s best chance of winning this referendum is to link it to Greece’s continued membership of the euro,” Raoul Ruparel from Open Europe told City A.M. “He needs to explain that a ‘no’ vote would leave Greece with no funds and no government, which would probably result in a disorderly default and ejection from the Eurozone.”