The Greek referendum and what it may mean for the global economy.

10:32 pm in Uncategorized by cmaukonen

Greek Protesters Setting Stage for Referendum (Photo: Scott D. Meyer, flickr)

Greek Protesters Setting Stage for Referendum (Photo: Scott D. Meyer, flickr)

From the Christian Science Monitor. One of the better sources available.

The chaos generated by George Papandreou‘s mere proposal to put Greece’s participation in the deal to a referendum exposed the fragility of the European plan and the lack of confidence it enjoys in markets.

A top European official warned that Athens could be left to go bankrupt if it went through with the vote and experts said the broader eurozone deal — which hopes to protect larger countries like Italy — could collapse.

Ultimately, Greece could leave the euro union, causing massive financial havoc and pushing the global economy back into recession.

That prospect could be enough to keep the referendum from happening — Papandreou’s government could collapse before the proposal goes through, having lost huge amounts of support from its own party.

After a grueling seven-hour Cabinet meeting, Papandreou’s ministers expressed “total support” for his referendum proposal and said the vote would be held “as soon as possible,” government spokesman Ilias Mossialos said early Wednesday.

But Papandreou’s government still faces a vote of confidence scheduled for Friday. The prime minister was summoned to attend emergency talks Wednesday on implementation of the bailout convened by French President Nicolas Sarkozy and German Chancellor Angela Merkel in Cannes, France, a day ahead of the Group of 20 Summit in the French Riviera.

The referendum proposal piled more pressure on an already creaking deal that was facing scrutiny from markets that found details wanting.

But Papandreou’s government still faces a confidence vote and if the government falls, all bets are off. And Greece may not even get it’s bail out loans it it goes ahead with the vote. Read the rest of this entry →