The Greek government it at risk of falling if a referendum on the bailout deal is rejected, consequently leading Greece to default.
The Greek Prime Minister, George Papandreou made the surprise announcement last night that he will be putting the new bailout deal agreed last week by euro zone leaders to a referendum vote.
The bailout deal entails a second, 130-billion-euro bailout and a 50-percent write-down on Greek government bonds.
Papandreou said he needed wider political backing for the fiscal measures and structural reforms demanded by international lenders.
“For the new agreement, we must go to a referendum for Greeks to decide,” Papandreou told lawmakers of his ruling socialist Pasok party in statements carried live yesterday from Athens on state-run Vouli TV. “Democracy is alive and well and Greeks are being called to rise to a national duty beyond the regular electoral processes.”
Papandreou told lawmakers he’ll seek a vote of confidence in parliament first and the referendum will likely be held after details of the EU accord are wound up. The vote of confidence will begin tomorrow and conclude late on November 4, according to statements yesterday by House Speaker Filipos Petsalnikos.
This will be huge gamble for the Greek PM and it will be difficult for him to get the Greek people to support his referendum.
A Greek newspaper poll by “To Vima” said 59 percent of Greeks say the new deal is negative for Greece.
Greek bonds are on the rise after the news and the euro has been plummeting. Also the upcoming ECB rate announcement is creating speculation of a rate cut.