News / Europe

World Stocks Plunge on Call for Greek Debt Plan Vote

TEXT SIZE - +
Henry Ridgwell

Greece has sent shockwaves across Europe by calling a referendum on the latest bailout deal. It means there's a big chance that the deal to save the euro currency - agreed to much fanfare in Brussels last week - could be sunk if the Greek people vote against accepting the terms of the bailout. 

The Acropolis monument looming over Athens is a constant reminder of this country’s ancient heritage.

Greece is known as the birthplace of democracy.

And it is the Greek people who will now decide their own economic fate - which will have consequences for the entire eurozone.

Prime Minister George Papendreou shocked politicians in Athens and beyond, by declaring a referendum on a new EU bailout.

Parliament will also hold a confidence vote in the government this Friday.

“This is the highest form of democracy, it is a great moment of patriotism for the citizens to decide, so let us then give the final word to the people and let the citizens decide," said Papendreou.

In recent months, waves of strikes and protests against austerity measures have crippled Greek cities.

The latest EU aid package would see further public sector pay and pension cuts and tax rises, designed to reduce Greek debt.

Opinion polls suggest over half of Greeks disapprove - meaning a ‘no’ vote in the referendum is a real possibility.

Political journalist Kostas Raptis says Greeks are increasingly turning against the European Union.

“It’s a very imbalanced relationship economically. And now politically as well. I mean, this sort of imbalance is now translated into the political field, with big eurozone economies dictating to the periphery countries what to do and how.”

That has rekindled tensions with Germany, which has been driving EU demands for more Greek austerity.

A national holiday in Greece last week to commemorate the World War II saw protesters waving anti-German flags and banners.

Previous demonstrations have seen re-enactments of alleged Nazi war crimes.

“Deep down some World War II animosities still survive, I suspect," said Raptis. "Many Greeks complain about the damages inflicted on our country during the war and about the need for proper German reparations.”

In public European leaders put on a show of unity. But the referendum is likely to strain relations.
.
"If it goes well he of course has the support of the Greek people," said Joerg Rocholl, President of the European School of Management in Berlin. "If not, it could lead to a situation where Greece can no longer remain a member of the euro zone".

If Greeks vote ‘no’, analysts say there’s no obvious alternative other than for Greece to default or leave the euro.

After a few days of relative calm - Europe has been plunged back into political and economic uncertainty.

World stock markets plummeted Tuesday on Greece's call for a referendum on the European debt-relief agreement, while the continent's leaders scrambled about how to react to the surprise development.

Asian indexes fell sharply, and European stocks plunged. Markets in Paris and Frankfurt slid more than four percent in afternoon trading, with U.S. indexes falling about two percent.  Stocks of banks holding Greek debt were especially hard hit.

European Union leaders Herman Van Rompuy and Jose Manuel Barroso said they "fully trust" Greece to uphold last week's eurozone debt-relief agreement. It forgives $140 billion in Greek debt, in exchange for the Athens government carrying out widespread austerity measures that have angered many Greeks, as well as boosting the continent's bailout fund for future emergencies.

But other European leaders and financial analysts said they were shocked when Greek Prime Minister George Papandreou late Monday called for the referendum, which could be held early next year. Several said a Greek vote against the debt-relief agreement would amount to Greece deciding to leaving the bloc of 17 nations that use the euro currency and lead to new turmoil on world financial markets.

World Bank president Robert Zoellick said it "could be a positive signal" if Greece votes for the debt agreement, but warned that if it is rejected, "it's going to be a mess."

Ireland's European affairs minister Lucinda Creighton said the referendum was a grenade thrown into the continent's financial turmoil just days after many thought European leaders had acted decisively to calm fears about a Greek default on its obligations. She said that "legitimately there is going to be a lot of annoyance" about the referendum plan.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would meet Wednesday in Cannes, France with leaders from the International Monetary Fund (IMF) and Greece to discuss the latest snag in solving the continent's debt crisis. The Group of 20 leaders of the world's biggest and emerging economies are headed to Cannes for a summit on Thursday and Friday. Economic issues are at the center of the summit's agenda, including the European debt crisis, and fears that it could spawn a new worldwide recession.

Papandreou has been a staunch supporter of the plan to cut Greece's debt, while binding his country to years of austerity measures. But Papandreou told ruling Socialist party members in Parliament that the "command of the Greek people will bind us." He said if the Greek people do not want it, the plan will not be adopted.

European and world leaders have praised the adoption of the plan aimed at cutting Greek debt and calming world financial markets worried about a Greek default. The agreement also forces European banks to increase their cash reserves and boosts the bailout fund.

But the Greek people for months have recoiled at the tax increases and spending cuts the Athens government has been forced to adopt to satisfy its international creditors. They have staged repeated strikes in protest, some of them violent.

One Greek survey showed 60 percent of those questioned took a negative view of the Brussels agreement, reached in the middle of the night last Thursday.

The Greek leader's call for a referendum came as new reports in Europe show that the economic fortunes of the 17 eurozone nations are markedly weakening, with higher unemployment and diminished growth prospects for 2012. Until Monday, there had been no suggestion of a referendum on the plan.

The Paris-based Organization for Economic Cooperation and Development (OECD) predicted that collectively the economies of the bloc of countries that use the euro will virtually stall in 2012, with some of them sliding into a recession. The agency projected growth of only three-tenths of one percent, less than a sixth of the 2 percent growth that was projected just five months ago.

You May Like

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid