Greek PM George Papandreou’s call for a bailout referendum may backfire economically and politically, as the BBC also reported Tuesday.
Last week’s summit of European Union leaders to find an emergency solution, or at least a stopgap measure, for the region’s compounding economic crisis initially led to a brief bounce in the markets and a flash of hope. That was squelched by Tuesday with the news that Greek Prime Minister George Papandreou was taking matters into his hands in a way that could jeopardize the EU’s plan—as well as his position. Ironically, much of this latest round of trouble for Papandreou comes as a result of his bid to get Greeks in on the process by casting their vote. —KA
Greece Prime Minister George Papandreou made a surprise call for a nationwide referendum on the new debt deal announced last week that calls for private sector bondholders to take a 50% haircut on Greek debt in return for promises from the government to cut spending and get the country’s debt-to-GDP ratio back to more reasonable levels.
The curveball Tuesday hammered stocks in for much of the day; at one point the slide knocked more than 300 points off the Dow Jones industrial average. Skepticism over whether Papandreou has the clout to get the referendum off the ground helped the market cut those losses though, while lawmakers in Greece were also pushing forward a no-confidence vote for the current government later in the week that could cost the prime minister his job.