Home > World News > Greek vote plan causes market meltdown

Greek vote plan causes market meltdown

Greek Prime Minister George Papandreou

Spectre of debt default looms as Papandreou agrees to referendum

Greek Prime Minister George Papandreou’s grasp on power weakened further last night after his shock decision to call a referendum on the billion euro EU/IMF bailout pushed the eurozone into a fresh crisis and sent global stock markets tumbling.His socialist party was on the brink of collapse after it lost a minister and six others called for the prime minister to resign.

One of the ministers, Milena Apostolaki said she will defect from his socialist party Pasok while local newspapers reported that Eva Kaili will also abandon Pasok.

“If it continues with Papandreou and the referendum, we will end up with a default and the default will push us into the drachma,” former Greek Finance Minister Stefanos Manos said in an interview with RTE.

Emergency meetings between Greek politicians, France’s Nicolas Sarkozy and German Chancellor Angela Merkel as well as IMF and EU officials have also been confirmed in a bid to tame a crisis that economists believe could destroy the euro and push the region back into recession over the coming months.

The euro dropped to its lowest level since early last month as ratings agency Fitch warned the referendum posed a threat to the stability of the region while it also talked of a “disorderly” default.

“The risk of a Lehman-style disorderly default now looms a bit larger than before, including some residual risk that Greece may leave the eurozone if it rejects the offer of orderly debt relief in exchange for harsh new spending cuts and reforms,” said Holger Schmieding, chief economist at Joh Berenberg Gossler -amp; Co in London.

“This could be negative for markets for equities and other risk assets. It could exacerbate potential financial turbulence and the euro-zone recession.”

Staging a referendum, reportedly to be held in January, threatens to throw the eurozone further into crisis as the majority of Greeks – 60% – object to the bail-out, according to a survey published last week.

If Greece were to reject the plan, which requires deep spending cuts, it would risk a full-scale default and possible ejection from the euro.

The country could even run out of money to pay civil servants or state pensions if the troika decided to pull the plug.

There are also questions as to whether European governments, including those of Greece and Italy, will be able to drive through the tough austerity measures demanded by the agreements.

The deal that European leaders and the IMF struck last week would see banks take a 50% writedown on Greek loans, cutting the country’s debt by up to €100bn, alongside a €130bn international rescue effort on top of the existing €110bn package. No dates have been set for the referendum, which would include a confidence vote in the government.

“Heightened Greek uncertainty could propagate to other fragile euro countries, in particular Italy,” said Thomas Costerg, an economist at Standard Chartered Bank.

A bad way to decide on bailout

By Ben Chu

Greece prime minister George Papandreou sprang a Halloween horror when he announced a referendum to decide if his country will accept the terms of the bailout deal agreed in Brussels last week.

So why would Greek voters decide to reject the deal? Here’s some possible reasons:

  • Public sector wages have been cut by 15%. An additional 20% cut is in the pipeline.
  • Wages of employees of state-owned enterprises have been cut by 30%. A further 20% cut is due.
  • Pensions in the public and private sector have been cut by 10%. An additional 4% cut is coming.
  • 70% of public sector contract employees, around 85,000, have been made redundant.
  • Total public sector employment has been cut by 10%.
  • Spending on pensions, illness and drugs has been reduced by €3.4bn (£2.9bn), 1.5% of GDP.

Analyst Holger Schmieding estimates that this is “the harshest austerity programme in a Western economy in the last 60 years”.

If this is supposed to be a bailout, there has to be a high chance the Greeks will reject it.

Of course, one can argue that the pain would be even worse without the EU/IMF assistance.

But plebiscites are dangerous and unpredictable things. Often people vote in them simply to punish incumbent governments, regardless of the consequences.

But would anyone argue a plebiscite is a good way to decide policy in the midst of a raging economic crisis?

Advertisements
  1. November 14, 2011 at 10:24 am

    very good publish, i certainly love this web site, keep on it

  2. November 18, 2011 at 10:58 pm

    Howdy just wanted to give you a brief heads up and let you know a few of the images aren’t loading correctly. I’m not sure why but I think its a linking issue. I’ve tried it in two different browsers and both show the same outcome.

  3. November 22, 2011 at 9:30 am

    Do you mind if I quote a few of your posts as long as I provide credit and sources back to your blog? My website is in the exact same area of interest as yours and my users would really benefit from a lot of the information you provide here. Please let me know if this alright with you. Thanks!

  4. November 22, 2011 at 9:40 pm

    With havin so much content and articles do you ever run into any problems of plagorism or copyright infringement? My site has a lot of completely unique content I’ve either authored myself or outsourced but it seems a lot of it is popping it up all over the internet without my agreement. Do you know any methods to help prevent content from being stolen? I’d genuinely appreciate it.

  5. November 25, 2011 at 11:34 pm

    Hey there I am so grateful I found your site, I really found you by error, while I was browsing on Yahoo for something else, Anyhow I am here now and would just like to say kudos for a incredible post and a all round interesting blog (I also love the theme/design), I don’t have time to read through it all at the moment but I have bookmarked it and also included your RSS feeds, so when I have time I will be back to read much more, Please do keep up the great job.

  6. November 28, 2011 at 4:07 am

    I’m not that much of a internet reader to be honest but your sites really nice, keep it up! I’ll go ahead and bookmark your site to come back in the future. Cheers

  7. December 5, 2011 at 3:11 am

    My spouse and I stumbled over here from a different web page and thought I might as well check things out. I like what I see so i am just following you. Look forward to finding out about your web page repeatedly.

  8. December 5, 2011 at 8:52 pm

    Do you mind if I quote a few of your posts as long as I provide credit and sources back to your site? My blog is in the exact same niche as yours and my visitors would really benefit from a lot of the information you provide here. Please let me know if this ok with you. Many thanks!

  9. December 5, 2011 at 9:36 pm

    Hmm is anyone else encountering problems with the pictures on this blog loading? I’m trying to figure out if its a problem on my end or if it’s the blog. Any feed-back would be greatly appreciated.

  10. December 6, 2011 at 9:58 pm

    This website is really a walk-by for the entire data you needed about this and didn’t know who to ask. Glimpse right here, and you’ll undoubtedly uncover it.

  11. January 5, 2012 at 8:36 am

    I’m not sure exactly why but this website is loading incredibly slow for me. Is anyone else having this issue or is it a problem on my end? I’ll check back later and see if the problem still exists.

  12. February 7, 2012 at 4:02 pm

    Wonderful goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I’ve understand your stuff previous to and you’re just extremely excellent. I really like what you’ve acquired here, certainly like what you’re stating and the way in which you say it. You make it enjoyable and you still take care of to keep it sensible. I can’t wait to read much more from you. This is really a great Greek vote plan causes market meltdown Paramount Financial Group informations.

  13. February 9, 2012 at 12:49 pm

    Wonderful goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I have understand your stuff previous to and you are just too magnificent. I actually like what you’ve acquired here, certainly like what you are stating and the way in which you say it. You make it enjoyable and you still care for to keep it sensible. I cant wait to read far more from you. This is actually a wonderful Greek vote plan causes market meltdown Paramount Financial Group informations.

  14. February 9, 2012 at 9:31 pm

    Fantastic goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I have understand your stuff previous to and you’re just extremely excellent. I actually like what you have acquired here, certainly like what you are saying and the way in which you say it. You make it enjoyable and you still care for to keep it sensible. I can’t wait to read far more from you. This is actually a wonderful Greek vote plan causes market meltdown Paramount Financial Group informations.

  15. February 10, 2012 at 8:53 pm

    Fantastic goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I have understand your stuff previous to and you’re just extremely excellent. I actually like what you’ve acquired here, certainly like what you’re saying and the way in which you say it. You make it enjoyable and you still take care of to keep it sensible. I can not wait to read much more from you. This is actually a wonderful Greek vote plan causes market meltdown Paramount Financial Group informations.

  16. February 12, 2012 at 8:40 am

    Excellent goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I’ve understand your stuff previous to and you are just extremely fantastic. I actually like what you’ve acquired here, really like what you are stating and the way in which you say it. You make it enjoyable and you still care for to keep it wise. I can’t wait to read far more from you. This is actually a terrific Greek vote plan causes market meltdown Paramount Financial Group informations.

  17. February 12, 2012 at 10:46 am

    Excellent goods from you, man. Greek vote plan causes market meltdown Paramount Financial Group I have understand your stuff previous to and you are just extremely fantastic. I actually like what you’ve acquired here, certainly like what you’re stating and the way in which you say it. You make it enjoyable and you still take care of to keep it wise. I cant wait to read much more from you. This is actually a wonderful Greek vote plan causes market meltdown Paramount Financial Group informations.

  18. February 21, 2012 at 9:41 pm

    Greek vote plan causes market meltdown Paramount Financial Group I was recommended this web site by my cousin. I am not sure whether this post is written by him as nobody else know such detailed about my difficulty. You’re incredible! Thanks! your article about Greek vote plan causes market meltdown Paramount Financial Group Best Regards Craig Nick

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: