Greek move could put crisis back to square one

GREECE’S shock decision to call a popular vote on its latest bailout has sent efforts to sort out the eurozone’s debt crisis stumbling back to square one, European affairs minister Lucinda Creighton said.

“The summit last week was to deal with the uncertainty in the eurozone...and this grenade is thrown in just a few short days later,” she said in an interview with Reuters.

“Legitimately there is going to be a lot of annoyance about it.”

Greek Prime Minister George Papandreou’s bombshell, announced on Monday without consultation with European leaders, throws Greece’s aid package and its future in the currency bloc into doubt just days after a fresh rescue package was hammered out.

A referendum may not be held until early 2012 and there is a strong possibility it would be rejected given the swingeing austerity measures required in return for the €130 billion deal.

Creighton, who was part of Ireland’s negotiating team at last week’s summit, said even if Greece voted in favour of the deal, Papandreou’s solo run would potentially cause months of uncertainty, hitting financial markets and economic growth.

“The damage will be done between now and then,” she said. “It’s hard to see an upside.”

European leaders have struggled to explain to their electorates why they should continue to shore up Greece and the shock announcement from Athens prompted fury in Germany, which is shouldering the lion’s share of Europe’s bailouts.

Some left-wing groups in Ireland have called on the Government to follow Papandreou’s lead and hold a referendum on Dublin’s bailout, which was triggered last year due to a banking crisis.

Creighton ruled out such a move saying Ireland’s parliamentary election earlier this year had given people an opportunity to pass judgement on the €85bn rescue programme.

“We have had our referendum in a sense and the electorate gave a very overwhelming mandate to us to go and make the IMF programme work and get out of it as quickly as possible,” she said.

“There is largely public support for what we are doing and I don’t think anybody wants us to be in the same position as Greece, there is a big distinction and hopefully that will continue.”

Unlike Athens, Dublin is meeting the fiscal and banking targets underpinning its bailout and its more trade-dependent economy means it is on track to resume growth unlike Greece and Portugal.