Greek PM announces referendum threatening euro zone with new crisis

PanARMENIAN.Net - Greek Prime Minister George Papandreou has threatened the euro zone with a new crisis with his shock announcement that he will hold a referendum on the last-minute bailout deal struck only last week to try to contain the bloc's debt mountain, Reuters reports.

Euro zone leaders agreed to hand Athens a second, 130-billion-euro bailout and a 50-percent write-down on its enormous debt to make it sustainable.

Papandreou, whose ruling Socialist party has suffered several defections as it pushes waves of austerity measures through parliament while protesters rally outside, said he needed wider political backing for the fiscal measures and structural reforms demanded by international lenders.

"If there was to be a referendum, we may reasonably conclude that they may not accept the austerity measures. We may conclude that it will bring the pack of cards tumbling down," Howard Wheeldon, senior strategist at BGC Partners in London, said.

Analysts said holding a referendum - likely to be held early next year and only Greece's second in almost 40 years - was baffling, given that the latest opinion poll showed a majority of Greeks took a negative view of the bailout deal.

The immediate market reaction to the announcement was negative, the euro extending losses against the dollar and tumbling more than 2 percent to a session low.