Thursday, November 3, 2011

Greek Papandreou chairs emergency talks over plebiscite controversy

Greece's government was on the brink of collapse today, casting doubt on plans to hold a referendum on staying in the euro zone, as European leaders contemplated a Greek exit to preserve their single currency.

Prime Minister George Papandreou chaired an emergency cabinet meeting in Athens, with his finance minister in revolt against a plebiscite, after the leaders of France and Germany gave Greeks an ultimatum to make up their minds.

French President Nicolas Sarkozy and German Chancellor Angela Merkel told Papandreou at a torrid meeting in Cannes that Athens would not receive a cent more in aid until it votes to meet its commitments to the euro zone. Greece was due a vital 8 billion euros installment this month.

The political chaos in Greece and uncertainty over the euro zone sent stocks and commodity prices lower in Asia, and fueled a rush into safe-haven German bonds. But financial markets rallied in nervous trading as the likelihood grew that Greece would not hold a highly risky referendum.

On his return with Papandreou to Athens from Cannes, Finance Minister Evangelos Venizelos issued a defiant statement, saying Greece's euro membership was a historic achievement and "cannot depend on a referendum."

More dissident lawmakers in the ruling PASOK party spoke out against a referendum and called for a national unity government or early elections, casting doubt on whether Papandreou can win a confidence vote tomorrow or pass a bill to hold a plebiscite.

Euro area leaders talked openly for the first time of a possible Greek exit from the 17-nation currency area, seeking to maximize pressure on Athens and to preserve the euro in case of a Greek "no" vote.

Merkel told a midnight news conference that while she would prefer to stabilize the euro with Greece as a member, the top priority was saving the euro, not rescuing the Greeks.

The chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said policymakers were working on possible scenarios for a Greek exit.

"We are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the euro zone. We are absolutely prepared for the situation," Juncker told Germany's ZDF television.

France's Europe minister, Jean Leonetti, said bluntly the euro could survive without Greece."Greece is something we can get over, something we can live without," he told RTL radio in an interview

The specter of a hard Greek default and euro exit hung over a meeting of G20 leaders beginning in Cannes today.