Debt deal referendum throws Greece in chaos

ATHENS, Greece - Lawmakers in Greece's ruling Socialist party revolted Tuesday over their prime minister's surprise decision to hold a referendum on a European debt deal, threatening the very survival of his embattled government.

Prime Minister George Papandreou's announcement on the public vote unleashed political and market turmoil around Europe and the world, and left observers wondering just how long his government could hold on.

One Socialist lawmaker defected, another called for an early election, and a third backed calls for a new cross-party government to be formed to safeguard the European deal. Separately, six senior Socialists also called for Papandreou's resignation, Greek media reported.

Papandreou appears to have told few people about his decision beforehand, leaving even his finance minister, Evangelos Venizelos, in the dark.

An official close to the finance minister said Venizelos "found out about it along with all other Greeks" during Papandreou's speech, which was televised live, to party lawmakers in parliament late Monday. The official spoke on condition of anonymity to discuss sensitive details.

Venizelos defended the move after the speech, but the Greek official said the minister had to back the premier amid huge dissent over government's repeated austerity drives. Venizelos was hospitalized early Tuesday with stomach pains but was expected to be discharged, the ministry said.

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Despite being hospitalized, he spoke by phone with German Finance Minister Wolfgang Schaeuble, Deutsche Bank chief executive Josef Ackermann, EU's Monetary Affairs Commissioner Olli Rehn and Poul Thomsen, the International Monetary Fund's mission chief for Greece.

Papandreou, meanwhile, spoke by phone Tuesday with German Chancellor Angela Merkel and was meeting with his ministers later. He also planned to talk with the French, German, European and IMF heads Wednesday in Cannes ahead of the G20 summit.

A public vote would allow the Socialists — who have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over austerity measures — to pass the responsibility for the country's fate onto the Greek people themselves.

But it was not even clear that the government could survive a confidence vote scheduled for Friday, let alone ask the Greek people how they felt about a bailout deal that took European leaders months of intense negotiations to work out.

Lawmaker Milena Apostolaki declared herself an independent deputy, whittling down the Socialists' majority to a mere two seats — 152 total — in the 300-member parliament.

"The crisis in the country has taken on uncontrollable dimensions and is threatening the cohesion of Greek society," Apostolaki said in her letter announcing her party resignation.

She described the plebiscite as "a deeply divisive procedure."

Prominent Socialist Vasso Papandreou called for a cross-party government to be formed to safeguard the European debt deal — essentially demanding the prime minister's resignation. As soon as that is done, she said, an early election should be held.

"The country is in danger of immediate bankruptcy," she told reporters outside parliament.

A third lawmaker, Eva Kaili, backed calls for the premier's resignation, saying the referendum risks overturning the debt deal and leading Greece into bankruptcy.

Greek opposition leaders who have vehemently refused to back the government's rounds of austerity measures called the move a political ploy.

"In his attempt to save himself, Mr. Papandreou set a divisive, blackmailing dilemma that endangers our future and our position in Europe," conservative New Democracy party leader Antonis Samaras said, vowing to stop the move "at all costs."

Greece has been surviving since May 2010 on a multibillion international bailout, but a second bailout is needed. European leaders held marathon negotiations last week to arrive at a new debt deal, which aims to seek 50 percent losses for private holders of Greek bonds and provide the troubled eurozone member with euro100 billion ($140 billion) in additional rescue loans.

Markets around the world plunged Tuesday on fears that the Greek vote will unravel Europe's plan to save the 17-nation euro.

Papandreou has not set a specific question, or a date, for the referendum, although ministers said it is expected early next year.

Under a new law passed just last month, a referendum can be called on issues of great national importance. But many have questioned Papandreou's motivation to call one on this debt deal, when he did not ask for a vote for Greece's first international bailout last year or for a new austerity package this year.

This would be the first referendum held in Greece since 1974, when Greeks were called on to decide whether they wanted to keep the monarchy after the fall of a seven-year dictatorship.

Other European nations, including France, held emergency meetings on the Greek move. The Netherlands' Labor party, whose support the Dutch government needs to pass the European debt deal through parliament, called the Greek vote a "deal-breaker."

"It can't be so that 17 countries sit down together to talk about a package to save the Greek economy and that we then have to wait until January to open an email to see if Greece wants it," Dutch Labor party financial spokesman Ronald Plasterk said.

The Fitch ratings agency described the Greek premier's decision as being one that "dramatically raises the stakes for Greece and the eurozone as a whole."

A rejection of the new deal "would increase the risk of a forced and disorderly sovereign default and ... potentially a Greek exit from the euro," Fitch said. "Both of which would have severe financial implications for the financial stability and viability of the eurozone."