Are you out of your f*%ing mind is what Papandreou has to be asked by Merkel and Sarkozy. The decision by Greek PM Papandreou to hold a referendum on the European plan to Save Greece is basically a call to the Greeks of whether they want in or out of the euro more than a vote on the latest bailout plan. The Greeks don’t want more austerity but they want to stay in the euro and that’s why the referendum will likely get a yes vote but we unfortunately have to wait until January for this. A no vote will lead to a collapse of the bailout, a hard default and a complete mess for everyone else. French bank stocks in particular are down 10-15% in response. Merkel and Sarkozy have to be furious as they apparently had no inclination that Papandreou was going to pull this after he was handed a 50% cut in their obligations to private bondholders. Knowing the mess this potentially creates, the main political opposition leader in the Greek parliament said his party “is determined to prevent at all costs such gambles” of a referendum. The DJ is reporting that he claims “Papandreou is blackmailing the Greeks in order to stay in power.” In Asia, China’s state business weighted PMI fell to 50.4 from 51.2, the weakest since Feb ’09. Taiwan’s PMI fell to 43.7 but South Korea’s rose by .5 pt to 48 and India’s rose to 52 from 50.4. Australia cut interest rates by 50 bps to 4.5% over concern with the global economic slowdown. Australia refilled their monetary policy gun with rate hikes over the two years when they realized the emergency was over and thus have plenty of flexibility to respond.
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