By JAMES CHAPMAN and HUGO DUNCAN 1st November 2011 Shock: Greek Prime Minister George Papandreou has taken many by surprise with his announcement of a referendum on austerity measures Europe's economic rescue package was in danger of collapse last night as Greece declared a shock referendum, Italy teetered on the brink of financial disaster and experts warned of a second recession and social unrest. Greek prime minister George Papandreou horrified other EU leaders by announcing that he will ask voters to approve a deal struck last week that would see 50 per cent of the country’s debts written off – but harsh austerity measures imposed for years to come. A ‘no’ vote would prove catastrophic for the EU and could prompt a disorderly default on the country’s debts and an exit from the euro. One recent poll showed that 59 per cent of Greeks think the new package is ‘negative’ or ‘probably negative’ for Greece. Last night Martin Callanan, Conservative leader in Brussels, said: ‘Are we witnessing the turning point in the eurozone crisis? Surely Greece must now leave the euro. It is clearly incapable of bringing its deficit under control.’ The extraordinary twist came as a leading international think-tank warned that failure to tackle the eurozone debt crisis could trigger another recession as brutal as after the collapse of Lehman Brothers. With growth figures of around 0.4 per cent for the latest quarter expected for Britain today, the Organisation for Economic Co-operation and Development predicted that the eurozone will come close to an economic halt next year, with growth of 0.3 per cent. Anger: The austerity measures in Greece have sparked prolonged and violent protests but the people of the country will now decide how to move forward Protestors in the northern Greek city of Thessaloniki carrying banners written in German, 'One people, one Reich, one Euro', paraphrasing a Nazi slogan and 'No to a new (German) occupation and a Greek 'wanted' poster bearing the photos of Mr Papandreou and finance minister Evangelos Venizelos says 'Wanted by the Greek people' Such a slowdown in Europe would badly dent Britain’s growth prospects, with Chancellor George Osborne already looking certain to have to massively downgrade growth forecasts next month. The OECD called for bold action at a G20 summit in France this week to stave off the threat of global disaster. It predicted a ‘marked slowdown’ in the single currency bloc with ‘patches’ of recession. But it said the outcome could be much worse if leaders fail to shore up the eurozone and stop the crisis spreading from Greece and Portugal to larger countries such as Italy and Spain. A repeat of the financial crisis of 2007-09 could wipe 5 per cent off the GDPs of major economies by the first half of 2013, said OECD secretary general Angel Gurria. Mr Gurría urged Britain to hold its nerve and stick to austerity measures set out in the coalition agreement. ‘In many cases, when you have a very large deficit, and that was certainly the case of the UK, you have to give signals that you are no longer choosing or wavering. ‘Very, very strong signals in the direction that you want to go in that will give confidence and power to the country in the markets. That’s exactly what happened,’ he said. David Cameron yesterday warned against talking down the British economy and pledged an ‘all-out mission’ to promote growth. Surprise, surprise: Papandreou delivers his announcement to the members of ruling PASOK party's Parliamentary group at the Greek Parliament in Athens ‘Above all, at home and abroad, we must counsel against the pessimism and fear that can become self-fulfilling prophecies in global markets,’ he said. But a second global watchdog said the world economy is on the verge of a major jobs crisis as the recovery in the West runs out of steam. It's up to them: William Hague says the matter of a referendum is for Greece to decide The International Labour Organisation, part of the United Nations, said it would take at least five years for employment in advanced economies to return to pre-recession levels. ‘The next few months will be crucial for avoiding a dramatic downturn in employment and further aggravation of social unrest,’ said ILO director Raymond Torres. Stock markets around the world tumbled yesterday as investors lost faith in the credibility of the eurozone deal. The FTSE 100 index dived 158.02 points to 5544.22 – wiping £41billion off the value of Britain’s leading companies. Italian borrowing costs rose above six per cent as the country’s towering debts – and the lack of political will to deal with them – alarmed investors about the stability of the EU’s third largest economy. ‘Time to forget Greece, Italy is the most scary guest at this eurozone Halloween party,’ said Louise Cooper, markets analyst at BGC Partners.Greek vote set to SINK euro bailout: Shock referendum could see cuts rejected...
as OECD warns EU growth will grind to a halt
Tuesday, 1 November 2011
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