will greece vote to default?

http://www.abc.net.au/news/2011-11-01/greek-pm-calls-for-referendum/3612816

GREEK REFERENDUM THREATENS NEW EUROZONE CRISIS
Updated November 01, 2011 19:07:49

Greek prime minister George Papandreou has threatened the eurozone with a new crisis with his shock announcement that he will hold a referendum on the last-minute bailout deal to contain the debt crisis.

Eurozone leaders agreed to hand Athens a second, 130 billion euro bailout and a 50 per cent write-down on its enormous debt to make it sustainable.

The immediate market reaction to the referendum announcement was negative, with the euro extending losses against the dollar and tumbling more than 2 per cent to a session low.

Early reactions to the surprise move ranged from accusations that Mr Papandreou was gambling with the country's future and predictions of default, to questions over the constitutional legality of the referendum, and statements by politicians that a no vote would force his resignation and early elections.

Mr Papandreou, whose ruling Socialist party has suffered several defections as it pushes waves of austerity measures through parliament while protesters rally outside, said he needed wider political backing for the fiscal measures and structural reforms demanded by international lenders.

"If there was to be a referendum, we may reasonably conclude that they may not accept the austerity measures," said Howard Wheeldon, senior strategist at BGC Partners in London.

"We may conclude that it will bring the pack of cards tumbling down."

But Mr Papandreou told Greek voters it was up to them to decide the country's fate.

"We trust citizens, we believe in their judgment, we believe in their decision," he told 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, grappling with Greece's worst financial crisis in 40 years, said the referendum would take place in a few weeks.

Finance minister Evangelos Venizelos told Greek TV it would probably be held early next year.

Analysts were divided over whether Greek voters would accept the deal, but agreed that a damaging month or two of market volatility lay ahead while pollsters repeatedly took the Greek voters' pulse and European leaders looked on nervously.

Greece is due to receive an 8 billion euro tranche in mid-November, but that is likely to run out during January, around the time of the referendum, leaving the government with no funds if there was a no vote.

Swinging opinion polls would leave markets fluctuating and Greece's EU partners dangling, and could prompt a run on Greek banks by nervous savers.

Reuters