Government in Greece Teeters After Move on Referendum

Athens – The Greek government was plunged into chaos on Tuesday, as lawmakers rebelled against Prime Minister George Papandreou’s surprise call for a popular referendum on a new debt deal with Greece’s foreign lenders.

The revolt by lawmakers and a no-confidence vote planned for Friday raised the prospect of a government collapse that would not only render the referendum plan moot but probably would scuttle — or at least delay — the debt deal that European leaders agreed on after marathon negotiations in Brussels last week. That, in turn, could put Greece on a fast track to default and raises the prospect of the country’s exit from the monetary union of countries sharing the euro currency.

The political instability in Greece has long dismayed European officials, who fear that it could touch off a financial market panic that could cause a damaging run on other shaky European economies like that of Italy, which is mired in its own political crisis. Indeed, European markets plunged on Tuesday on the news from Greece, in most cases in excess of four percent.

On Tuesday, European leaders said the deal reached last week to write down 50 percent of some Greek debt was the best available way to put Greece on a growth path and to build a financial “firewall,” but that bulwark now seems to be breaking down.

In an effort to limit the damage, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France said they would hold emergency talks on Greece with the European Union, the International Monetary Fund and euro zone leaders on Wednesday, news agencies reported. They said they also plan to meet with representatives of the Greek government before a critical meeting of the G-20 group of advanced and emerging economies on Thursday.

Analysts said that Mr. Papandreou’s call for a referendum was a last resort, meant to gain broader political support for the unpopular austerity measures in the deal without forcing early elections that would only worsen the country’s political and economic turmoil.

But after weeks of mounting pressure, one Socialist lawmaker quit the party to become an independent, reducing Mr. Papandreou’s majority to 152 seats out of 300 in Parliament, and another six Socialists wrote a letter calling on Mr. Papandreou to resign and schedule early elections for a new government with greater political legitimacy. Together, the developments made it doubtful whether his government would survive a confidence vote planned for Friday.

Meanwhile, the center-right opposition New Democracy party on Tuesday stepped up its calls for early elections. Its leader, Antonis Samaras, has opposed most of the austerity measures the government accepted in exchange for foreign financial aid. Mr. Samaras has said that if he were in power, he would try to renegotiate the terms of Greece’s arrangement with its principal foreign lenders, known as the troika: the European Union, the European Central Bank and the I.M.F.

“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Mr. Samaras said on Tuesday. “New Democracy is determined to avert, at all costs, such reckless adventurism.”

Mr. Samaras declined to say whether he would ask his 85 members of Parliament to resign, a move that would lead to the dissolution of Parliament and a snap election. The next general election was not due until 2013, when the Socialists’ four-year-term expires. Mr. Samaras is expected to clarify his stance at a meeting of his party’s parliamentary group on Wednesday.

European leaders have repeatedly dismissed Mr. Samaras’s notion of renegotiating Greece’s deal with its lenders, saying that trying to do so would be damaging and would throw away months of work on a plan to keep Greece from defaulting.

Mr. Papandreou’s referendum proposal seemed to be his last, best hope of retaining power. His political capital has dried up, and he faces intense anger from voters who have been squeezed to the breaking point by the austerity measures demanded by Greece’s foreign lenders.

“Papandreou could not take more political punishment,” said George Kirtsos, a political analyst and the owner of the Athens City Press. “We have a strange situation: Everyone’s cursing the government, and everyone expects the government to do the job by itself — to reorganize the economy, to cut the deficit, to make a deal with the Germans — but at the same time, nobody helps him.”

Many Greek voters say they are tired of hearing about decisions taken in foreign capitals and political initiatives that do not represent ordinary Greeks. “The government is no longer in control, others are calling the shots,” said Akis Tsirogiannis, a 42-year-old father-of-two who recently lost his job at a furniture workshop in Athens

But he said he shared the skepticism of many other Greeks that snap elections would solve anything. “The opposition parties are even worse than the government,” he said. “They don’t have a clue about what needs to be done, they just want to grasp the chance to get into power.”

He said he would vote against the debt deal in a referendum, should the government survive to hold such a vote. “This deal, like all the others, is a life sentence of austerity for Greeks. The country is being run from the outside — by bankers and the European Union government. We need to reclaim our country, whatever that entails.”

Charged by Europe with dismantling the welfare state they helped create, many of Mr. Papandreou’s Socialist members of Parliament feel they too have reached their breaking points.

Vasso Papandreou, a prominent member of parliament and a former minister who is not related to the prime minister, called on Greek President Karolos Papoulias to order the formation of a unity government ahead of early general elections. “Bankruptcy is imminent,” she said. Earlier this month, Ms. Papandreou said she would vote for a new raft of austerity measures, but that it would be “the last time” she supported the government unconditionally.

If Mr. Papandreou’s government falls, it would not be the first one in Europe to be toppled by the austerity demanded by European debt relief. In Ireland and Portugal governments fell after accepting bailouts from the European Union and the I.M.F., and last month the Slovakian government fell over a vote on whether to participate in the European Union’s rescue package.

Niki Kitsantonis reported from Athens and Rachel Donadio from Rome. Stephen Castle contributed reporting from Brussels.
This article has been revised to reflect the following correction:

Correction: November 1, 2011

An earlier version of this article misspelled the surname of George Kirtsos and rendered incorrectly the name of the Athens newspaper he owns; it is the City Press, not the City Paper.