GREECE'S PRIME minister unexpectedly announced a referendum to approve a second EU bailout deal for his austerity-hit country, less than a week after it was agreed with international creditors at a European Union summit.
George Papandreou made the pledge last night in a speech to lawmakers in his fractious PanHellenic Socialist Movement (Pasok) party but did not set a specific date for the vote.
"We have faith in our citizens, we believe in their judgment and therefore in their decision," Mr Papandreou said after rejecting a call for early elections by some socialist politicians. "All the country's political forces should support the [ bailout] agreement. The citizens will do the same once they are fully informed."
The premier's move reinforced concerns that Greece's fraught domestic politics are spiralling out of control amid growing popular anger over public sector job cuts and tax increases. Strikes and violent demonstrations have become frequent in Athens and other cities.
The referendum also looked likely to cause alarm in Brussels, Paris and Berlin after Mr Papandreou's assurances at Wednesday's summit that Greece was determined to maintain a steady pace of reform.
One senior EU official said that Mr Papandreou had appeared reticent about the components of the bailout package during talks at last week's summit of EU presidents and prime ministers but no one was prepared for the referendum announcement that came "like a bolt out of the blue.
"I don't think anyone expected this," the official said. "The calculation has to be this is the only way [ Papandreou] believes he can get this through."
"With an irresponsible opposition that is promising Greek voters the moon, it is very difficult to see how this referendum could be won," added Sony Kapoor, head of Re-Define, an economic consultancy. "The decision is good for democracy but is likely to make the euro crisis worse by heightening uncertainty in this very fragile environment."
An opinion poll published on Sunday showed that more than 60 per cent of Greeks were opposed to the terms of the new bailout, which would include another 100,000 job losses over the next three years and big cuts in pensions.
The vote would probably be held in January, when Greek bondholders were expected to sign up for a voluntary 50 per cent haircut being negotiated with the International Institute of Finance, wrapping up the new bailout package. One Athens banker said: "This is a worrying decision by the prime minister. It could derail the whole process even before it's properly started." The premier also announced that a vote of confidence in his government would be held this week to endorse the referendum proposal.
Antonis Samaras, the conservative opposition leader, immediately rejected the proposal, arguing that a referendum was "not the way out".