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Greece will hold a referendum on a new European debt deal reached last week.

"This will be the referendum: the citizen will be called upon to say a big yes or a big no to the new loan arrangement," the troubled country's prime minister George Papandreou announced to Socialist members of the Greek parliament.

"This is a supreme act of democracy and of patriotism for the people to make their own decision … We have a duty to promote the role and the responsibility of the citizen.

The European nations are linked in a network of debts, as Bill Marsh recently illustrated in the New York Times with a beautiful piece of graphic art. Greece and Italy are prominent; Ireland, Portugal and Spain lurk ominously nearby. France and Germany seem exposed, too, as does the U.S.

The image is like a complex wiring diagram for a ticking debt bomb. Yet what it shows may be less important than what it leaves out: a largely invisible network of ties among institutions around the world, which could ultimately cause global financial chaos.

This hidden network has been created by institutions that buy and sell unregulated credit-default swaps. These are essentially insurance contracts on bonds; in the event of a default on the bond, the seller of the swap promises to pay the buyer the bond’s value.

Credit-default swaps are mostly arranged “over-the-counter,” not traded on any exchange or recorded by any central information repository. This explains why Marsh’s map couldn’t show the links they create.

But these undisclosed ties matter a lot. They were the primary reason the U.S. government needed to intervene in 2008 to prevent the collapse of insurance giant American International Group Inc. Ignoring the looming trouble with subprime mortgages, AIG had blithely sold CDS contracts insuring mortgage-backed securities to Goldman Sachs Group Inc., Societe Generale SA, Deutsche Bank AG and other firms. Suddenly, AIG was potentially on the hook for almost half a trillion dollars in payments. Through CDS contracts, AIG’s failure could have spread distress throughout the global financial system.

Snail wrote:What a strange time for a referendum. Very strange. I wonder why now. Internal politics, China, USA, Germany, Banks, Greece trying to get a better deal? Can't believe Greece is suddenly trying to stand up for itself. A way out of the Euro for Greece? The end of the Euro?

2 As and a B wrote:There was always going to be a crisis with the Euro. Both proponents and opponents knew this. The former hoped that the crisis would further their aim of political union (via adding fiscal union to monetary union). The latter feared complete union.

If Greece votes no, the pan-European state plan would stall and Euro-bloc could break up (amid global financial chaos). If the vote is yes, welcome to the United States of Europe.

Hands up those who think global financial chaos is going to be avoidable by any means.

In a surprise move, on Tuesday evening the defence minister replaced the country’s top brass.

bicyclebloke wrote:getting close to a coup d'etat?

In a surprise move, on Tuesday evening the defence minister replaced the country’s top brass.

http://www.athensnews.gr/portal/8/49916

Prime Minister George Papandreou sacked the Greek military high command Tuesday. The move came amid furor on the part of world governments and international financial markets over his proposal to submit a European Union bailout plan that spells years of punishing austerity for Greek workers to a popular referendum.

The Greek defense ministry issued a terse emailed statement that Papandreou had dismissed his chief of national defense, the Greek Army general staff chief, the heads of the Air Force and the Navy, along with 12 other senior officers.

The announcement fueled rumors in Greece of an impending military coup. These fears are founded on an understanding that the drastic cuts in employment, living standards and essential social services that have been demanded by Europe’s ruling elites as the price for a partial relief of the country’s debt burden cannot be imposed by democratic means.

If a coup is threatened, it is undoubtedly not merely a matter of domestic tensions. Rather it would stem from decisions taken in Berlin, Paris, Washington and NATO that the interests of finance capital require a Pinochet-style solution to the problems in imposing the decisions of the EU on a resisting Greek working class.

Fresh from its bloody success in Libya, NATO may well be preparing another exercise in “regime change,” this time in one of its own member states.

World governments have reacted to Papandreou's referendum announcement with unconcealed anger and dismay. French President Nicolas Sarkozy and German Chancellor Angela Merkel have summoned Papandreou to Cannes for emergency talks in advance of the G20 summit there.

The Financial Times of London Tuesday quoted a former PASOK cabinet minister as warning in relation to the Cannes talks, “That could be a dangerous absence on the part of the prime minister.”

Papandreou’s grandfather, Georgios Papandreou, who was also prime minister, was forced out of office and then died under house arrest following a 1967 military coup. That coup brought to power a repressive junta that ruled the country until 1974, implementing wholesale repression, outlawing political parties and unions and carrying out mass arrests and systematic torture