Will the threat of a Greek bailout referendum spark a global economic meltdown?
*MarketWatch, by William L. Watts, November 1, 2011:
'A surprise decision by Greek Prime Minister George Papandreou to
put the nation's latest bailout plan to a referendum renewed fears of a
potentially messy default and sparked a global market rout on Tuesday
as investors again questioned Europe's ability to contain its debt
crisis.
The announcement -- on Monday evening in Europe -- of the referendum
and plans for a confidence vote took investors and Greece's euro-zone
partners by surprise.
It injected new tensions into government bond markets, with Italian
government bond yields rising sharply toward euro-era highs.
Equities tumbled in Europe and on Wall Street even as the ink was
barely dry on a three-pronged rescue effort hammered out by European
leaders in a marathon summit early last Thursday morning.
The euro traded at $1.3677 versus the dollar, plunging from $1.3908 in
North American activity late Monday.
'As if last week's half-baked euro summit deal hadn't left enough
questions unanswered about the policy response to deal with the crisis,
[the referendum announcement] adds a further, very significant layer of
uncertainty to the outlook,' said Chris Scicluna, an economist at Daiwa
Capital Markets in London.
Austerity fatigue
The move is a high-stakes gamble by Papandreou, who is seeking to shore
up support for further austerity and economic liberalization measures
amid mounting public dissatisfaction, wrote economists Fabio Fois and
Julian Callow at Barclays Capital.
The confidence vote is expected this week, while a referendum appears
likely to take place in January, analysts said.
Polls published over the weekend found that around 60% of Greeks were
unhappy with the latest bailout package. The Greek government won
approval last month of a fresh round of austerity measures in return
for the disbursement of its latest aid round from the troika of
international lenders made up of the International Monetary Fund, the
European Union and the European Central Bank.
'The limits to austerity were always one of the major unknowns in the
debt crisis and it appears that they may have been reached in
Greece. We may have to wait until January . . . to find out,'
said Gavan Nolan, director of credit research at data provider Markit.
While plenty of economists had viewed last week's summit agreement on
European debt as falling short of a permanent solution, the Greek
uncertainty could mean the deal provides even less respite from the
crisis than anticipated.
Leaders agreed to a three-pronged plan that will see private investors
take a 50% writedown on Greek government debt, recapitalize European
banks and boost the firepower of the euro-zone bailout fund to 1
trillion euro.
The referendum appeared to take Papandreou's fellow European leaders by
surprise. European Commission President Jose Manuel Barroso and
European Council President Herman Van Rompuy, in a joint statement,
said they had been in contact with Papandreou and that they expected
Greece to abide by commitments made at last week's summit.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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