With a shock call for a referendum on 'debt package'
:
Greece plunges eurozone back into crisis
GREECE: Greece plunged the eurozone back into crisis and markets into
panic on Tuesday with a shock call for a referendum on a debt rescue
package reached just days ago with huge difficulties.
Prime Minister George Papandreou's decision to hold a confidence vote
on Friday and then a referendum on the debt deal stunned investors,
angered EU leaders and left the eurozone back at square one, with Italy
now under pressure just ahead of a high-profile Group of 20 summit in
France.
The turmoil saw some European markets slump by 5.0 percent or more
and pushed borrowing rates uncomfortably near record levels for Italy,
which can ill afford to pay extra to raise funding given its strained
finances. French President Nicolas Sarkozy called Greece to order,
insisting, in concert with Germany, that last week's accord was the only
way to solve its debt problems.
Noting that the referendum call "surprised all of Europe," Sarkozy
said "France reminds everyone that the accord adopted ... unanimously by
the 17 member states ... is the sole possible way to resolve Greece's
debt problems.
"Giving people a voice is always legitimate but the solidarity of all
the eurozone countries is not possible unless each one agrees to
measures deemed necessary," Sarkozy said.
France and Germany, he added, took the initiative to hold a meeting
Thursday before the opening of the G20 summit in Cannes, of all European
institutions, the International Monetary Fund and the Greek prime
minister to discuss "the conditions under which the engagements
undertaken will be kept."
The White House meanwhile said the uncertainty caused by Greek's move
showed the need for rapid implementation of the eurozone deal.
The announcement "just reinforces the notion that ... the Europeans
... need to elaborate further and implement rapidly the decisions they
made last week," US President Barack Obama's spokesman Jay Carney said.
"It remains the case that the Europeans have the capacity to deal
with this crisis and they need to implement the very important decisions
they made last week to provide a conclusive resolution to it," Carney
added.
The latest turn in the eurozone debt saga put Italy right back in the
firing line, raising fears that it could follow Greece, Ireland and
Portugal in needing a bailout and that the contagion could spread even
further, to Spain.
Italian stocks closed down 6.80 percent with bank shares in free
fall, in the worst session since the start of the global financial
crisis in 2008. Borrowing rates also shot up to well above 6.0 percent,
coming close to levels that most believe cannot be sustained for the
long term. In an effort to get ahead of the debt curve, Italian Prime
Minister Silvio Berlusconi promised to take "rapid" action on economic
reforms, long sought by his European partners, ahead of the G20 summit.
He told German Chancellor Angela Merkel that "the Italian government
is determined to introduce the measures rapidly," his press office said.
Berlusconi had sought to ease market concern and pressure from
Italy's eurozone partners last week with promises to increase the
pension age, launch a privatisation programme and reform labour laws to
make firing easier.
In a brief phone call to Merkel, Papandreou told the chancellor that
the referendum would "strengthen the country in the eurozone. AFP
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