Greece debt crisis: Referendum promised on EU deal

Greece will hold a referendum on a new European Union aid package intended to resolve the country's debt crisis, Prime Minister George Papandreou says. Last week eurozone leaders agreed on a 100bn-euro loan (£86:$140bn) to Athens and a 50% debt write-off, as part of a deal aimed tackling the euro crisis. But there have been large-scale protests in Greece against the austerity measures demanded by the EU. Analysts say a referendum could derail the wider deal on the euro debt crisis. The Greek rescue package is a key part of the agreement reached in the early hours of Thursday after marathon talks by eurozone leaders. They said banks holding Greek debt accepted a 50% loss, the eurozone bailout fund will be boosted to about 1tn euros (£880bn; $1.4tn) and banks will have to raise more capital. Opinion polls in Greece show that most people do not support the austerity deal. Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros. "The command of the Greek people will bind us", he was quoted as saying by the AFP news agency. He set no date for the referendum, but indicated that it would be held after details of the deal have been finalised with the EU and the country's creditors. It is a big gamble for Mr Papandreou, who will argue that it is in Greece's national interest to support the deal, the BBC's Europe editor Gavin Hewitt reports. But our correspondent says that many people in Greece say they prefer the chaos of default to years of hardship. On Friday, there were protests in several cities around Greece. An important annual parade was cancelled in Thessaloniki after demonstrators blocked the route and shouted insults at President Karolos Papoulias. Many Greeks believe the government has gone too far in allowing the EU and the International Monetary Fund (IMF) to dictate the austerity measures needed to secure the bailout. Mr Papandreou has also faced growing dissent from within his own Socialist party over the impact of the measures. The party's approval ratings have plunged and its parliamentary majority has been cut by several defections to other groups. Analysts say the promise of a referendum allows Mr Papandreou's government, which has born the brunt of public anger over the austerity measures, to pass responsibility for the country's future to the Greek public. "The new agreement will be submitted to parliament for approval and then submitted to the judgment of the Greek people," Finance Minister Evangelos Venizelos told the Antenna TV channel. "The Greek people can, of course, say no but must bear in mind the consequences of that decision." Opposition parties said the government had only announced the referendum to avoid having to call an early general election. "The prime minister is trying to buy time," said Costas Gioulekas from the right-of-centre New Democracy party. "We want clear solutions. And a clear solution is obvious: elections."