Greek Referendum on Reforms? Another Complication in the Crisis

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Greece’s Prime Minister, George Papandreou, announced in the Greek parliament that he will hold a referendum about the structural reforms during the autumn. This promise of a referendum goes to appease the discontent about the austerity measures and exposes the weakness of the Greek government. The EU and IMF may ignore the fact that Greece didn’t fulfill its obligations and still transfer the money of the current tranche. But will there be someone in Greece to receive it?

The announcement was made on a special session of the parliament on Sunday, in which Papandreou presented his new cabinet. His newly appointed finance minister, Evangelos Venizelos, is already in Luxembourg, attending a special meeting of the European finance ministers that discusses the Greek crisis.

According to Spain’s ElEconomista, Papandreou wishes to reach a political consensus. He also called opposition parties to participate in a government, but they refused. Some of the members of his ruling Pasok party already quit, and his government is expected to pass the vote of confidence on Tuesday with a very narrow majority.

There was some talk of a referendum a few weeks ago, but this was dismissed very fast. But now, this official announcement is already more important and it shows two things:

  • Papandreou isn’t certain that he’ll pass the vote of confidence on Tuesday: Demonstrations don’t stop in Athens and this has an impact on some members of parliament. This move shows his uncertainty.
  • A referendum will delay the next tranche: It seems that the European Union and the IMF will ignore the failure of Greece to meet the conditions of the bailout plan, and that they will approve the next tranche scheduled for the end of June. This will be “kicking the can down the road” until September. If the referendum is on the required reforms, this will delay the next tranche. The current political atmosphere isn’t likely to change, and the referendum will probably result in a NO answer.

This isn’t good news for the euro. For more on EUR/USD, including technical analysis, see the euro to dollar forecast.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.