Greek PM to attend crisis talks in Cannes
Updated: 2011-11-03 07:33
ATHENS, Greece - Greece's prime minister faces a grilling from the leaders of Germany and France after fighting to win the backing of his cabinet to hold a referendum on a 130 billion euro ($179 billion) bailout package.
French President Nicolas Sarkozy and Chancellor Angela Merkel of Germany summoned George Papandreou for crisis talks in Cannes on Wednesday night, before a G20 summit of major world economies. They will push for rapid implementation of measures to tackle the eurozone debt crisis, which Athens has thrown into doubt.
"This announcement took the whole of Europe by surprise," Sarkozy said on Tuesday on the steps of the Elysee Palace in Paris. "The plan ... is the only way to solve Greece's debt problem."
Negotiations on the plan to save Greece from bankruptcy cannot be reopened, German Foreign Minister Guido Westerwelle said on Wednesday.
"The whole program we just agreed last week cannot be placed back on the table," Westerwelle said on the sidelines of an international conference on the future of Afghanistan in Istanbul.
Papandreou's gamble guarantees weeks of uncertainty just as the 17-nation European currency area is desperate for a period of calm to implement the remedies agreed last week to corral its sovereign debt crisis.
Some of Papandreou's party called for him to quit, accusing him of endangering Greek euro membership with his shock decision to call a popular vote, a move that pummeled the euro and global stocks.
But the cabinet support at least gives him a stay of execution before a confidence vote in parliament on Friday.
"The referendum will be a clear mandate and a clear message inside and outside Greece on our European course and participation in the euro," Papandreou told a cabinet meeting on Tuesday that lasted seven hours.
"No one will be able to doubt Greece's course within the euro."
Even if he wins the confidence vote, the eurozone faces weeks of uncertainty in which markets can create havoc. Europe's banks would be under even greater pressure and the much larger economies of Italy and Spain would face even more severe threats and doubts. The currency bloc may not have the resources to bail out all the countries in trouble.
European stock markets steadied, after earlier falls, on Wednesday as traders awaited the outcome of the meeting between the Greek prime minister and the French and German leaders.
Investors are also concerned over rising eurozone debt pressure on Italy.
Juncker, European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso and IMF chief Christine Lagarde will also attend the talks on Wednesday night in the southern French resort town.
The risk premium on Italian bonds over safe-haven German bonds hit a euro-lifetime high on Tuesday to levels that proved unsustainable for Ireland and Portugal, despite European Central Bank buying of its bonds.
Until the Greek situation is clearer, key elements of the deal hammered out by eurozone leaders last week are likely to be unresolved.
The head of Germany's banking association, Michael Kemmer, said agreement on a 50 percent write-down of Greek debt by its private creditors would have to wait. "I can't imagine a debt exchange taking place before the referendum," he said.
Fabian Zulaag, head economist at the European Policy Center, said the euro crisis was likely to dominate the G20 but the Greek referendum will serve to intensify the issue. But the G20 has little ability to resolve the crisis as there is no momentum, he said.
"It is unlikely that the issue will be solved at this level, Europe will have to solve it internally," he said.
Guy de Jonquieres, senior fellow at the European Center for International Political Economy, said the referendum, if it goes ahead, will delay and might even sabotage the agreed package.
Reuters and Eveline Filon contributed to this story.