In what turned out to be a gruelling day for the Greek cabinet, Prime Minister George Papandreou won the support needed for a vote at a later date on the referendum. Greece is unhappy with the terms set forth in the second bail-out package and they are determined to send a message about their discontent.
At the heart of the referendum is Greece’s reluctance to abide by austerity measures set forth by the EU when they agreed on the second bail-out for the heavily indebted country. In a statement released by the prime minister’s office on Wednesday, he states that the referendum will send a clear message on Greece’s future with the euro and their level of participation, if any.
In response, Germany’s Chancellor Angela Merkel and France’s President Nicolas Sarkozy summoned Papandreou to meet with them in regards to what they consider a shocking move on his part calling for a referendum. Along with Merkel and Sarkozy, the meeting will include Christine Lagarde of the International Monetary Fund and various heads of key financial institutions in Europe.
A sense of panic hit the financial markets on Tuesday as fear spread that Greece would default after having been offered generous conditions for the bail-out. A disorderly Greek default set pandemonium through global markets after which Germany and France became more determined than ever to ensure the implementation of the decisions made in the eurozone summit last week.
After last week’s summit the financial market saw significant gains but this week’s actions by Greece set in motion a political upheaval which is unravelling the markets. In fact, Société Générale in France even recorded its largest single day fall since the 1987 privatisation legislation.
European leaders believe Greece’s default as a bigger issue for the Greek economy than for the rest of the eurozone. The economy in Greece could only be improved with the second round of bail-out money, according to such leaders as Germany and if Greece defaults their country will most certainly be sent into further chaos. Much hinges on the meeting scheduled between Greece, France, Germany and European financial leaders.
