Peter Paschalis: Greeks fear for their futures as Europeans

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There was stunned disbelief in Greece yesterday after George Papandreou called for a referendum and a confidence vote on a cliffhanger debt rescue deal agreed by the EU last week after marathon talks.

Greek newspapers spoke of a "high-risk" gambit with uncertain consequences, while the opposition accused the Prime Minister of dividing the nation at a critical moment when its economic survival hangs in the balance. The main opposition leader, Antonis Samaras, accused Mr Papandreou of jeopardising Greece's European future.

"In order to save himself, [he] has set a divisive dilemma which endangers our future and our position in Europe," Mr Samaras said. "At this time, there is a national need for elections."

Commerce and industry groups argued that the government's move was ill-advised at a time when investor confidence in Greece was at an all-time low and with consumer demand killed off by a deepening recession and a seemingly unending taxation drive.

"Greek traders cannot comprehend the motive behind this, and the desired result of a referendum," said Vassilis Korkidis, head of the national confederation of Greek traders.

"We do not need blackmailing dilemmas and division. We need solutions to our problems, not high-risk political manoeuvring."

The Greek economy is expected to contract by 5.5 per cent this year, and the recession will likely continue for a fourth consecutive year in 2012. Unemployment is already running at more 16 per cent and there are fears it will exceed 20 per cent next year.

Despite nearly two years of sacrifices, the Greek economy is far from meeting deficit reduction targets agreed with the European Union and the International Monetary Fund, heightening feelings of futility in the country. Successive pay and pensions cuts, coupled with tax rises, have brought waves of general strikes and street demonstrations that frequently turn violent.

The government had hoped to defuse tension over its austerity policies, both in society and inside its ranks. On Monday, the Finance Minister, Evangelos Venizelos, told Socialist MPs that the referendum was to act as a safety valve. "The country can no longer bear to live this drama, there needs to be catharsis," said Mr Venizelos, who was hospitalised with an inflamed appendix shortly after giving his speech.

But many Greeks were also expressing opposition to Mr Papandreou's decision. "I do not agree," said Anthi Pappa, a jobless woman in her 50s. "After they lowered our wages, after all that happened, why should there be a referendum? I agree for elections."

"I don't believe its right," added Yiannis Manolakis, a businessman. "The people are not experienced to judge the economic policy of the government or the European Union."

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