Greek Referendum Threatens Bailout Deal
Apparently, Greece has never heard the expression “beggars can't be choosers”. After Euro leaders agreed the bailout deal last year that would effectively release the pressure valve on Greece, at least for a while, Greek Prime Minister George Papandreou announced that there would be a referendum.
Perhaps we should not be surprised. Greece is, after all, the country that invented democracy and they love a good vote. But this shock decision has led to barely veiled threats from the understandably frustrated Germans and edgy markets.
According to Reuters, “European politicians complained that Athens was trying to wriggle out of the rescue deal agreed only last week, concerned not so much about the fate of Greece as the possibly dire consequences for the entire currency union.”
Now there are suggestions that the euro zone should throw Greece out of the nest and allow it to default. It is easy to understand why those opinions are being aired. This seems like a grossly ungrateful reaction from Greece when Europe is attempting to get it back on track.
Perhaps more worrying to the rest of the globe is the fact that the news has investors scurrying, one eye on the chaos that is Greek parliament (seats seem to be being exchanged at an alarming rate). After the pick up of the bailout deal, the markets are now reeling from Papandeou's announcement.
According to Bloomberg, “European stocks dropped, extending the Stoxx Europe 600 Index's biggest plunge in four weeks, as the announcement of a Greek referendum spurred concern that the country may default. U.S. futures and Asian shares retreated. Credit Suisse Group A (CSGN) and Danske Bank A/S led a selloff in lenders, both dropping more than 7 percent, after earnings fell short of analysts' estimates. National Bank of Greece SA (ETE) sank 12 percent in Athens trading. Mining companies tumbled after a gauge of Chinese manufacturing dropped to the lowest level since February 2009.”
At the time of writing, unconfirmed reports were suggesting that Papandreou has been admitted into hospital with stomach pains.
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