Greek Prime Minister Papandreou Under Pressure

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This story is based on a radio interview. Listen to the full interview.

Audio Transcript:

Lisa Mullins: I am Lisa Mullins and this is The World. Greece got an ultimatum today. The leaders of France and Germany said, "Make up your mind by next month if you want to stay in the Eurozone." That message came during an emergency meeting in France today. Greek Prime Minister George Papandreou was summoned there to explain his surprise decision to call for the Greek people to vote on the latest Greek rescue package. It was just agreed on by officials last week. Matina Stevis is the European Economics correspondent with Dow Jones and the Wall Street Journal. She is currently in Athens and she says there's been mixed reactions there to the news of a public referendum.

Matina Stevis: Greeks feel like, basically, the Prime Minister is making them make the final decision on something that is quite impossible to decide on. Also, many people I have spoken to here in Athens say that this is quite hypocritical considering that these policies, the austerity policies that have been affecting the Greek economy and the Greek people in a very, very bad way for the last two years, have been in place and no one asked them before whether they liked it or not. So, to ask them now, two years into an austerity program is basically, just to put it bluntly, they're rich.

Mullins: Why is he asking them now?

Stevis: Well, there are several interpretations. One interpretation is that he just wants a fresh mandate to continue with his policies. The second interpretation is that he has had enough of opposition, especially within his own party, and he wants to quiet it once and for all. The third interpretation is that he is potentially eager to go to elections, maybe because he wants to leave government. I mean, he's governing a country that has been called ungovernable by so many people by now. But the official line coming from Mr. Papandreou is that this is a very important existential decision for Greece and he wants the most democratic way of arriving to it and that, in his view, is a referendum.

Mullins: Okay. So, some say he's standing up for democracy, as you say. Others think this is highly irresponsible. How about European leaders, are they weighing in on this?

Stevis: Well, exactly. Today, European leaders are going to be weighing in on this from all sides because George Papandreou is meeting with his counterparts of Germany, of France and also the International Monetary Fund's Christine Lagarde, other European leaders from Brussels; and they were all quite shocked to hear about his intention to hold the referendum. We understand they had not been warned about this. And not only that, but they are set to exert a lot of pressure on him to stay the course that was agreed in Brussels a week ago, to go on and accept the second program and to get over this referendum problem as soon as possible. Our information is that most of these leaders do not want a referendum in Greece. They believe that it spells uncertainty, affects the market badly and it just has a bad negative effect on the rest of the Eurozone.

Mullins: Spell that out for us a little bit more. What does this mean for the Eurozone and for Europe as a whole?

Stevis: The EZ was not at risk, per say. However, the deal that was agreed, and which Mr. Papandreou now throws into question because of this referendum, was seen as a small but positive step forward after months upon months of indecision. The problem with the Eurozone debt crisis may have started in Greece but it affects other countries. Ireland and Portugal are already receiving bail-out money; but also, a lot of pressure is exerted on Italy the 3rd biggest economy in the Eurozone. So, we have seen Italy accepting a lot of pressure from the market; its cost of borrowing increasing rapidly into unprecedented territory. That's all because the markets are now very worried that these Eurozone countries, starting from Greece but also the other ones that I just mentioned, may not be able to make their payments on their debt; may not be credible enough to become more sustainable in terms of how they manage their public spending. So while Greece has become the symbol of this crisis and the arena in which everything has been tried, tested and argued, the problem and the solutions go far beyond Greece.

Mullins: Matina Stevis is European Economics correspondent for Dow Jones and the Wall Street Journal.