Germany and France give ultimatum to Greece

Papandreou is facing opposition from his finance minister who has objected to the referendum on more bailouts [AFP]

German and French leaders have told Greece it will not receive any more bailout funds until it decides whether it wants to stay in the eurozone.

Angela Merkel and Nicolas Sarkozy also stressed that saving the euro was ultimately more important to them than rescuing Greece.

“Our Greek friends must decide whether they want to continue the journey with us,” Sarkozy, who said last week that it was a “mistake” to allow Greece into the eurozone, told a news conference in the French southern resort of Cannes.

George Papandreou, the Greek prime minister, sparked fears and panic on financial markets by announcing on Monday that Greece would hold a referendum, tentantively on December 4, on a second bailout plan negotiated with eurozone leaders last week.

But Papandreou is facing opposition from his finance minister, Evangelos Venizelos, who said on Thursday he was against the referendum.

“The essence is that this is not a question only of a programme, this is a question of whether we want to remain in the eurozone“ – Greek prime minister George Papandreou

Venizelos, who accompanied the premier to Cannes for a meeting with European officials, said Greece’s position within the euro was a “historic conquest” and that it “cannot be put in doubt” and “cannot depend on a referendum”.

A legislator from the ruling party also joined the chorus of party members urging Papandreou to withdraw his plan for the referendum.

Al Jazeera’s Jonah Hull, reporting from the capital Athens, said it had been unclear whether senior members of Papandreou’s cabinet would speak with one voice on the referendum.

“Now it appears they don’t … Venizelos is a very senior member of the Socialist party. He’s thought to be next in line for the leadership of the party,” he said.

“He’s not thought to be a major fan of the prime minister and is not happy with the way all of this has played out. Indeed he was not even told about the referendum before it happened.”

Currency stability key

Germany’s Merkel told the Cannes news conference the stabilisation of the euro could be better achieved “with Greece than without Greece”, but added that stabilising the currency was more important.

The news conference was held after the two leaders met Papandreou, who was summoned to meet them in the resort on the sidelines of a G20 summit.

Sarkozy said Greeks had to decide whether they want to stay in the eurozone [Reuters]

“It’s not the moment to give you the exact wording, but the essence is that this is not a question only of a programme, this is a question of whether we want to remain in the eurozone,” Papandreou said.

Opinion polls suggest a majority of Greeks, worried about austerity measures, think the bailout package is a bad deal for Greece, but Papandreou said he expected more support from the population than he could garner in parliament.

“I believe the Greek people are wise and capable of making the right decision for the benefit of our country,” he said.

Sarkozy and Merkel said eurozone finance ministers would meet next Monday to expedite decisions on leveraging the eurozone’s rescue fund to build a firewall to protect other weaker members of the currency area.

Jean Leonetti, France’s European affairs minister, said there was no question of the eurozone renegotiating Greece’s bailout package. 

Sarkozy’s office said several eurozone leaders attending the G20, including the Spanish and Italian prime ministers,
would meet on Thursday morning in Cannes to review the crisis.

Markets rattled

In fresh signs of the market turmoil unleashed by the Greek move, the eurozone’s EFSF rescue fund, which lends money to troubled member states, was forced to put on hold plans to raise $4.12bn in the bond market.

The move cames as Italy’s financial stability panel said some Italian banks were having difficulty raising money on international
markets.

Asian G20 members pressured Europe to tackle the crisis before it wreaks serious harm on the world economy.

China’s deputy finance minister, Zhu Guangyao, said he hoped the uncertainty over the Greek referendum could be contained.

Beijing, he added, could not consider investing more in the euro zone’s bailout fund given the lack of detail on proposals
to leverage it.

The comments echoed Chinese President Hu Jintao’s remarks that Europe was mostly responsible for resolving the debt crisis.

“It has to be depended mainly on Europe to resolve the European debt problem,” Hu told Sarkozy in Cannes ahead of the G20 leaders meeting on Thursday and Friday, the official Xinhua news agency said.

“We believe that Europe has all the wisdom and capability to resolve the debt problem.”

Lee Myung-bak, South Korea’s president, said the G20 must act swiftly and boldly to contain the crisis, which was spilling over to the rest of the world.

If Papandreou loses the referendum, Greece faces a disorderly default which would hit Europe’s banks and
threaten the much larger economies of Italy and Spain, which the bloc may not have the means to bail out.
 
The chairman of eurozone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the
bailout package and Japan’s finance minister, Jun Azumi, said: “Everyone is bewildered.”