http://www.reuters.com/...
http://www.washingtonpost.com/...
— Markets plunged Tuesday on fears that Europe’s plan to save the euro was already unraveling after the shock decision by Greek Prime Minister to call a referendum on the country’s latest rescue.
Stock markets plunged across Europe on Tuesday, with the Athens exchange losing almost 7 percent, while the euro fell another 1.2 percent, on worries the Greek government could lose the referendum vote with the potentially devastating consequence of a disorderly debt default and Greece’s exit from the common currency.
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“While it may be the democratic thing to do ... what happen if Greece votes ‘no’, which is possible given how unpopular the bailout plan appears to be amongst Greece’s voters,” said Michael Hewson, markets analyst at CMC Markets. “The resulting fallout could well result in a complete meltdown of the European banking system and throw Europe into turmoil.”
News that Greece’s Finance Minister Evangelos Venizelos went to a clinic after suffering stomach pains added to the renewed bout of fears in the markets.
He's not the only one with stomach pains this morning. The prospects of a referendum have unraveled the world markets and likely ushered in months of uncertainty and volatility, potentially derailing the confidence--manifested as recently as last week-- that a European deal had been reached.
http://www.nytimes.com/...
The stakes are extremely high. A no vote could break the deal between Greece and its so-called troika of foreign lenders — the European Union, European Central Bank and International Monetary Fund — which have demanded structural changes and austerity measures in exchange for aid.
Without the aid, Greece would not be able to meet its expenses and would default on its debt, sending shock waves through the euro zone and the world economy.
If Greece defaiults, now a very real possibility, it will be increasingly difficult to save Italy and Spain. Italy is the world's eighth largest economy.
Papandreou has also asked for a vote of confidence on his government. The vote could be held as early as Friday.
Many Greeks view the proposed referendum with cynicism:
Disillusioned Greeks heaped scorn on Prime Minister George Papandreou's plan to put a bailout lifeline to a popular referendum, with some viewing it as a ploy to win backing for harsh austerity measures.
"This referendum is a bluff. They are just mocking us," said Emanuel Papadopoulos, 50-year-old street cleaner
Papandreou is widely expected to tout the referendum as a choice between austerity (and implicitly, remaining in the Euro) and utter economic collapse:
With anger running high in Greece over wave after wave of austerity measures that have hiked taxes, lowered wages and triggered strikes, analysts fear Greeks will vote down their financial lifeline and push the country to economic collapse.
"It's absurd. Now they have put the ball in our court, but isn't it their responsibility to decide?" said Haris Velakoutakou, a 64-year-old tour guide.
"What is this? They should have done this referendum from the beginning, before all these austerity measures were taken."
A poll over the weekend showed nearly 60 percent of Greeks have a negative view of the rescue deal, suggesting that voters in the referendum likely to be held early next year, will say no to the rescue package.
But on the streets of Athens, there was a sense that the government would attempt to cajole Greeks into backing the unpopular bailout by warning them that the alternative is a full-scale financial collapse that brings Greece to its knees.
The Wall Street Journal describes the European reaction as "aghast."
The Greek prime minister’s sudden lurch toward more democracy also seems to have caught most of the rest of Europe unaware. It was, in the tempered words of Rainer Bruederle, a senior German lawmaker, “a strange thing to do.”
The irony speaks for itself.
For the reaction in the U.S., check this link. periodically throughout the day.
Note: Some of the links above are refreshing faster than my ability to keep up with them. They are all, however, original quotes from the linked publications.
7:38 AM PT: Update--Dutch Labor Party, whose assent is necessary for approval of the rescue plan by the Dutch government, calls Greek decision to hold referendum a "Deal Breaker."
http://finance.yahoo.com/...=