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Take it or leave it

November 2, 2011

As Europe demands an explanation from Greece's prime minister for his decision to hold a referendum on the latest EU bailout, voters are warned that a rejection of the rescue plan is a rejection of the euro all together.

George Papandreou welcomes cabinet ministers to meeting
Papandreou faces a vote of confidence on FridayImage: picture-alliance/dpa

Germany's foreign minister issued a warning to Greece on Wednesday, saying the bailout package agreed to by European Union leaders last week cannot be renegotiated if it fails in a referendum scheduled for the coming months.

"The whole program we just agreed last week cannot be placed back on the table," Westerwelle told reporters in Istanbul on the sidelines of a conference on Afghanistan. He added that Greece could not expect financial help from the bloc without making sacrifices.

"Every country in the EU does its own homework, which means reforms are necessary."

The comments came less than 48 hours after Greek Prime Minister George Papandreou announced plans to hold a referendum on the country's latest bailout by the EU. Greek Interior Minister Haris Kastanidis said Wednesday that the vote could be moved up from January to December.

Protesters in prisoner costumes stand outside government
Anti-government protests and strikes have become commonplace in GreeceImage: dapd

Papandreou won the full backing of his cabinet on Wednesday, despite harsh criticism from lawmakers in Greece and across the globe that the referendum risked throwing the whole eurozone into even more financial chaos.

Günther Oettinger, EU energy commissioner, said the rescue package for Greece was a "good opportunity" for Greeks, but that he understood they were dissatisfied with the entire crisis.

"The Greeks have many good grounds to vote for the package," he told the German daily newspaper Die Welt. "But there's a lot of frustration and resignation in Greece. If the Greeks actually vote no, the consequences are unforeseeable."

Dwindling majority

Despite backing from his cabinet, cracks have begun to form in Papandreou's Socialist majority in parliament. One Socialist lawmaker has defected to the opposition over the referendum, and six others called for Papandreou to resign. The prime minister faces a vote of confidence on Friday.

In the face of abysmal approval ratings and protests and strikes that seem to be a weekly occurrence, Papandreou said the referendum was the Greek voter's chance to give a "clear mandate and a clear message in and outside Greece" on whether the country should continue on its path.

"The dilemma is not 'this government or another one', the dilemma is 'yes or no to the agreement', 'yes or no to Europe', 'yes or no to the euro,'" he said.

Line of dropping stock prices behind video of Greek PM Papandreou
Markets dropped on the referendum news amid fears a 'no' vote could push Greece into bankruptcyImage: picture-alliance/dpa

'Irritating development'

The international response to the referendum call was largely skeptical, as a "no" vote could end the EU's emergency loan program to Greece, thereby pushing the country into bankruptcy and forcing it to abandon the euro currency.

"This announcement took the whole of Europe by surprise," French President Nicolas Sarkozy told reporters on the steps of the Elysee palace in Paris. "The plan... is the only way to solve Greece's debt problem."

Germany, the biggest EU financier of Greece's bailouts, gave a mixed reaction, with Klaus-Peter Flosbach, financial policy spokesman for the governing Christian Democrats, calling it an "irritating development." Frank-Walter Steinmeier, parliamentary leader of the opposition Social Democrats, said the referendum was a "risky, but courageous path."

Sarkozy and German Chancellor Angela Merkel were to meet with Papandreou in the French city of Cannes on Wednesday ahead of a summit of the Group of 20 leading industrial and developing economies. Representatives of the EU and the International Monetary Fund, the two main funders of Greece's bailouts, were also to attend the meeting.

No plan for growth

Euro coins piled atop Greek flag
The EU has offered Greece 100 billion euros in fresh loansImage: picture alliance / ZB

Public support for the bailout deal, which obliges Greece to continue its course of harsh austerity measures, was difficult to gauge. A weekend opinion poll found that nearly 60 percent of Greeks viewed the EU summit last week as "negative" or "probably negative," although more than 72 percent wanted to remain in the eurozone.

The agreement provides 100 billion euros ($137 billion) in new public financing for emergency loans, and asks banks to take a voluntary 50 percent reduction in the value of their Greek government bonds. It also upholds demands that Greece cut its massive budget deficit with painful spending cuts.

Nick Malkoutzis, deputy editor of the Kathimerini newspaper's English edition, said the agreement among EU leaders was not the comprehensive plan many Greeks had hoped for.

"It left a very open question about how Greece gets out of this crisis," he told Deutsche Welle. "One thing the agreement doesn't tackle is where growth, where job creation is going to come from, how the country is going to move forward. And the government has also proved that it doesn't really have an answer to that question either."

Author: Andrew Bowen
Editor: Nancy Isenson

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