When George Papandreou, the Greek Prime Minister, dropped the referendum bombshell on October 31, 2011, he stunned other EU countries and caused stock markets to go into freefall. Such is the fear that the Greek people will vote NO, to the latest debt bail-out package.
Whatever the motive for calling a refendum it will take the markets sometime to recover. Perhaps leading Greeks will be buying stocks at rock bottom proces before the people vote, who really knows. So what was the Greek Prime Minister's motive for the referendum announcement?
In Germany the response by some was that Greece was being ungrateful. That this referendum could push Greece out of the Eurozone once and for all. Perhaps that is what is hoped for. Let's face it, in the last week Greece has been slated by France, with their Prime Minster denying that Greece was ever financially fit to join the Erozone.
Today it has been revelaed that even Papandreou's Finance Minister was not informed of a referendum announcement. It came as a massive shock to him also. However, Papandreou has inisted that he needs wider political backing for accepting the latest bail-out.
In some ways he is doing what all the other G20 leaders do and is looking after his own back-yard. Germany and France have been good at this in recent years so they can hardly bleat when Greece folllows suit.
The Greek people have widely poured scorn on Papandreou's announcement. They see it as a way to blame the people for the country's ills but perhaps finally put an end to social unrest in the country. If the people vote YES and accept the austerity measures and bail-out surely strikes and protests will cease?
Most Greeks, it seems think, Papandreou is simply bluffing and angling for political survival. Could be. They would have been happier to have held a referndum when the Greek debt crisis began.
The vote is not likely to be held until early next year so what will happen in the interim?
The latest debt package, hammered out last week, will give the Greeks a 130 billion euro ($181 billion) rescue package. It will help keep the Greek economy afloat. Without it Greece and much of the Eurozone has frankly, had it. Maybe it is time to let what will be, be. Currently it seems as if Europe is just delaying the inevitable.
As markets continue to tumble today, November 1, 2011, it will be a black day as far as financial matters go.
Just when the big countries of the Eurozone thought they had it all sewn up the Greek Prime Minister George Papandreou has called for a referendum.
The Greek Parliament passed the necessary austerity measures needed to secure further loans to prevent the country falling into bankruptcy, but now it will be up to the people.
The Greek people have constantly shown their displeasure at such austerity measures. Greece and its Prime Minister is in a Catch 22 situation.
Without the austery measures the EU will not keep bank rolling Greece and without these cash injections tthe Greek economy will fail. In what will be a domino effect it is easy to see how the whole of Europe could tumble.
It is obvious when you think about it, that EU countries have a vested interest in Geece staying solvent. If they did not they would probably have already given up the ghost as far as Greek economic woes are concerned. The EU has been bailing Greece out on a monthly basis and each month Greece looks as if it will be unable to pay its debts.
If Greece were a person who was struggling to stay financially solvent there could be a time when bankruptcy was the only option. Sadly that could be the case in the future for Greece. Bankruptcy would chaos in Europe but why delay the inevitable? If it is to be then to keep bank rolling Greece is pointless.
One thing that will bring Greek debt to a head is a referendum. The Prime Minister is to let the people decide. In a move which the UK government would not dare leave to the UK people, Papandreou said, if Greek people do not want the deal that is designed to slash the country's mountain of debt by nearly a third, it will not be adopted. Strong words which could spell disaster for many countries around the world.
As yet the Greek PM has given no further details of the proposed referendum. It will have to be held soon for Greece to either secure further bail outs or default on loans and go into bankruptcy. He said, "This will be the referendum: the citizen will be called upon to say a big 'yes' or a big 'no' to the new loan arrangement. This is a supreme act of democracy and of patriotism for the people to make their own decision ... we have a duty to promote the role and the responsibility of the citizen."
Well said but many EU leaders will be taking a sharp intake of breath right now. Hold onto your hats it looks like we in Europe could be in for a bumpy ride.