Global insights audio-slides-11-02-11

This chart accompanies the podcast recordedNovember 2nd, 2011

A REFERENDUM? Bombs ..or Bonds Away!

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A REFERENDUM? = UNCERTAINTY!



"The announcement has surprised the whole of Europe. Giving the people a way to express themselves is always legitimate, but the solidarity of all the euro-zone countries cannot be exercised unless everyone agrees to make the necessary efforts. France wants to stress that the plan agreed last Thursday unanimously by the 17 states of the euro zone is the only possible path to solve the Greek debt problem.“

French President Nicolas Sarkozy

Mr. Papandreou's move risks having unintended consequences on France's domestic politics ahead of a presidential election, set for next year, in which Mr. Sarkozy is widely expected to run. Only five days ago, Mr. Sarkozy explained in a primetime television interview the complex negotiations behind the deal to save Greece, and how the "crucial" Brussels summit, driven by the Franco-German pair, had avoided a global financial "catastrophe.“

"Europe has acted too late and too softly on the financial front, too harshly on the economic front," said François Hollande, the Socialist presidential candidate.






"We trust citizens, we believe in their judgment, we believe in their decision," he told ruling Socialist party deputies. "In a few weeks the

(EU) agreement will be a new loan contract ... we must spell out if we are accepting it or if we are rejecting it.“

•Mr. Papandreou didn't consult or inform other European leaders or even cabinet colleagues, including his finance minister, before proposing a referendum, according to people familiar with the matter.

•The revolt within Mr. Papandreou's ruling Socialist party left the premier with just enough support in Parliament to survive in office, for now—but with too little support to launch his plebiscite. Under Greek law, Parliament must approve a proposal for a referendum.

•"The referendum call is basically dead," said one senior Socialist party official.

A REFERENDUM? = UNCERTAINTY!

The important question to be resolved is whether the present government will be replaced by an interim national unity government for several months ratifying in parliament the Eurogroup decisions of last week and then proceeding with elections, or else whether national elections will be immediately announced with probable dates the 4th or 11th of December.




INTERNATIONAL REACTION



European leaders intended to convey a message that their 11th-hour agreement last week to avoid a messy Greek default, boost their bailout fund and stabilize the region's banks had kept catastrophe at bay.

The focus for Cannes was to discuss what the rest of the world could now do to stimulate global growth. While officials stress the summit isn't meant to be a pledging session, Europe's decision to partly back its expanded rescue fund with investment from countries with large foreign-exchange reserves such as China and Japan had been set to dominate much of the meeting.

•Less than a week after euro-zone leaders agreed on a "comprehensive package" of measures to keep Greece afloat, reassure financial markets and stabilize the region, the outcome of Europe's debt crisis is more uncertain than ever.

•"We want to convey to the Greeks that there is no alternative to the existing package of measures that we agreed in Brussels," a European official familiar with the situation said. "We need quick clarification of the Greek government's mandate; we cannot wait until January."

•White House Press Secretary Jay Carney said the call for a referendum "just reinforces the notion" that the euro zone needs to implement the bailout plan rapidly.




A REFERENDUM?






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A REFERENDUM?



Economy & Finance

Global insights audio-slides-11-02-11