World and Nation

Greece plans referendum on latest Europe aid deal

ATHENS, Greece — In a surprise move that jolted Europe and put his political future in play, Prime Minister George Papandreou announced Monday that his government would hold a referendum on a new aid package for Greece, putting austerity measures — and potentially membership in the eurozone — to a popular vote for the first time.

Analysts said the vote on the austerity package did not immediately threaten the comprehensive agreement reached by European leaders last week to shore up the eurozone. More likely, they said, a rejection by the voters would be treated as a vote of no confidence in the government and lead to early elections.

But the decision to go ahead with the vote introduces a note of uncertainty in what had seemed to be a done deal. The anxiety stirred up by those fears hammered U.S. financial markets Monday, showing once again how the domestic politics of even the smallest members of the European Union can create troubles that not only threaten the currency but reverberate around the globe.

Addressing lawmakers Monday evening, Papandreou said the decision on whether to adopt the deal, which includes fresh financial assistance, debt relief and deeply unpopular austerity measures, properly belonged to the Greek people.*

“Let us allow the people to have the last word, let them decide on the country’s fate,” he said.

The move was widely seen as an effort by Papandreou to shore up his flagging political fortunes and to avoid the instability of early elections. The center-right opposition has opposed the bulk of the austerity program, and the prime minister’s popular support has dwindled as Greeks have been hit by a seemingly endless series of tax increases and wage and pension cuts.

A referendum would in effect shift responsibility for the nation’s painful economic choices from Papandreou’s Socialist Party onto the public.

By framing the debate as one of continuing to use the euro or returning to the drachma, the move also appeared to give the Greek government a bit more breathing room — and leverage — in negotiations with Europe over the debt deal, proving that a matter that some in Germany had hoped had been settled last week still had the potential to be reopened.

“It’s not motivated by the intention of some sort of brinkmanship with Europe, but it may have this sort of positive or negative effect,” said George Pagoulatos, a professor of European politics and economy at Athens University of Economics. “It raises the stakes. It’s about, ‘Will we remain in the euro with a lower public debt or we will lose everything that we will achieve?’”

At a time when Papandreou is under intense political and social pressure, including from members of his own Socialist Party, the move was seen as the last card he could play.

It was still unclear how the referendum question would be posed, but Papandreou said the vote would be on whether Greeks supported the debt deal and the program of austerity measures in exchange for foreign aid.