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Government in Greece Teeters After Move on Referendum

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By NIKI KITSANTONIS and RACHEL DONADIO

Published: November 1, 2011

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ATHENS The Greek government was plunged into chaos on Tuesday, as lawmakers rebelled against Prime Minister George Papandreous surprise call for a popular referendum on a new debt deal with Greeces foreign lenders. Enlarge This Image

Thanassis Stavrakis/Associated Press

Power company customers lined up in Athens on Monday to ask about a new tax. President George A. Papandreous surprise promise of a vote on austerity measures threatens a deal reached to ease the European debt crisis.
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Share your thoughts. Post a Comment Read All Comments (346) The revolt by lawmakers and a no-confidence vote planned for Friday raised the prospect of a government collapse that would not only render the referendum plan moot but could also scuttle or at least delay the debt deal that European leaders agreed on after marathon negotiations in Brussels last week. That, in turn, could put Greece on a fast track to default and raises the prospect of the countrys exit from the monetary union of countries sharing the euro currency. The political instability in Greece has long dismayed European officials, who fear that it could touch off a financial market panic that could cause a damaging run on other shaky European economies like that of Italy, which is mired in its own political crisis. Indeed, European markets

plunged on Tuesday on the news from Greece, in most cases by at least 5 percent. Stocks in the United States also dropped sharply, erasing some of the recent gains. The referendum announcement took European officials by surprise. The Greeks didnt tell the European institutions, the European Central Bank, the French or the Germans, said one European official speaking on condition of anonymity because of Greek sensitivities on the issue. Its not even clear they told each other. In an effort to ensure that the debt deal is implemented promptly, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France said they would hold emergency talks on Greece with the European Union, the International Monetary Fund and euro zone leaders on Wednesday. They said they also plan to meet with representatives of the Greek government before a critical meeting of the G-20 group of advanced and emerging economies on Thursday. Analysts said that Mr. Papandreous call for a referendum was a last resort, meant to gain broader political support for the unpopular austerity measures in the deal without forcing early elections that would only worsen the countrys political and economic turmoil. But after weeks of mounting pressure, one Socialist lawmaker quit the party to become an independent, reducing Mr. Papandreous majority to 152 seats out of 300 in Parliament, and another six Socialists wrote a letter calling on Mr. Papandreou to resign and schedule early elections for a new government with greater political legitimacy. Together, the developments made it doubtful whether his government would survive a confidence vote planned for Friday. Meanwhile, the center-right opposition New Democracy party on Tuesday stepped up its calls for early elections. Its leader, Antonis Samaras, has opposed most of the austerity measures the government accepted in exchange for foreign financial aid. Mr. Samaras has said that if he were in power, he would try to renegotiate the terms of Greeces arrangement with its principal foreign lenders, known as the troika: the European Union, the European Central Bank and the I.M.F. Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma, Mr. Samaras said on Tuesday. New Democracy is determined to avert, at all costs, such reckless adventurism. Mr. Samaras declined to say whether he would ask his 85 members of Parliament to resign, a move that would lead to the dissolution of Parliament and a snap election. The next general election was not due until 2013, when the Socialists four-year-term expires. Mr. Samaras is expected to clarify his stance at a meeting of his partys parliamentary group on Wednesday. European leaders have repeatedly dismissed Mr. Samarass notion of renegotiating Greeces deal with its lenders, saying that trying to do so would be damaging and would throw away months of work on a plan to keep Greece from defaulting. Almut Mller, a European Union expert at the German Council on Foreign Relations raised the possibility that European policymakers, who have worked closely together throughout the euro crisis, had come to the conclusion that a Greek exit was inevitable and saw the referendum as the best way to accomplish it. If Greek citizens decide to vote against it, it would be very difficult for the Greeks to stay in the euro zone, Ms. Mller said. Maybe this is the most elegant way of leaving the euro zone, not members kicking out a country but the Greeks choosing, through democracy and with legitimacy to leave. Under this scenario the decisions reached last week would have been not to save Greece but to handle the consequences of its departure for the banks and for other weakened, heavily indebted members. 1 2

Next Page class="authorIdentification" Niki Kitsantonis reported from Athens and Rachel Donadio from Rome. Stephen Castle contributed reporting from Brussels and Nicholas Kulish from Berlin. class="articleCorrection" This article has been revised to reflect the following correction: Correction: November 1, 2011 An earlier version of this article misspelled the surname of George Kirtsos and rendered incorrectly the name of the Athens newspaper he owns; it is the City Press, not the City Paper. comments (346) Sign In to E-Mail Print Single Page class="reprints" Reprints

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