News / Europe

Greek Cabinet Backs Papandreou Plan for Referendum on Debt Plan

Greek Prime Minister George Papandreou, Nov 1, 2011
Greek Prime Minister George Papandreou, Nov 1, 2011
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Greek Cabinet ministers are giving their support for Prime Minister George Papandreou's plan to hold a refernedum on the European Union debt relief deal.

A Greek government spokesman said after a marathon Cabinet meeting early Wednesday that a public vote would come as soon as possible after the details of the latest debt agreement are worked out.

Mr. Papandreou's announcement stunned the world Tuesday and sent global markets plunging as investors reacted to a major jolt of uncertainty in the European economy.

The prime minister told his Cabinet that Greeks would be asked whether they want to keep using the euro currency. He said any deal will only be implemented with the consent of the Greek people, and that he hopes any turmoil caused by his unexpected announcement will be only temporary.

A number of lawmakers in the prime minister's Socialist Party oppose an up-or-down public vote. Some party members are demanding Mr. Papandreou's resignation, and his government faces a no-confidence vote Friday in Parliament.

Mr. Papandreou has strongly supported the European Union plan to cut Greece's debt, which would obligate severe domestic spending cuts and tax hikes. It also would eliminate jobs now held by thousands of public employees.  

Terms of the latest deal offered by the EU call for European banks to forgive 50 percent of Greece's debt. That appeared to calm nervous markets at first, but then Mr. Papandreou told Socialist lawmakers Tuesday that he will honor results of the referendum.

EU leaders Herman Van Rompuy and Jose Manuel Barroso said they "fully trust" Greece to uphold last week's eurozone debt-relief agreement.  French President Nicolas Sarkozy said letting people vote is "always legitimate," but that a Europe-wide agreement is the only possible way to resolve the debt crisis.

World Bank president Robert Zoellick said that if voters reject the plan, "It's going to be a mess."

Mr. Sarkozy and German Chancellor Angela Merkel plan to meet Wednesday in Cannes, France, with leaders from the International Monetary Fund and Greece to discuss the latest snag in solving the continent's debt crisis.

Some information for this report was provided by AP and Reuters.

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