Greek government on verge of collapse

Several ruling party members quit over referendum on bailout package, reducing PM’s majority ahead of confidence vote.

 Sarkozy and Merkel told the Greek PM more bailout funds would depend on Greece staying in the eurozone [AFP]

The government in Greece is on the verge of collapse as opposition to the Greek prime minister’s proposed referendum on more eurozone bailout funds grows.

Several members of George Papandreou’s ruling socialist party have distanced themselves from his proposal, with Evangelos Venizelos, the finance minister, saying Greece’s position in the eurozone “cannot depend on a referendum”.

Costas Panagopoulos, managing director of pollsters ALCO, said: “I don’t think the government will last until tonight.”

Papandreou, who was told by European leaders on the sidelines of the G20 summit in France that his country had to choose whether it wants to stay in the eurozone or miss the bailout, faces a confidence vote on Friday.

A series of defections cast doubts on whether he will keep his job.

Nikos Salayannis, a legislator from the ruling party, said on state radio: “The referendum is dead.”

The defections came as Barack Obama, the US president, said the most important task of the G20 summit in the French resort of Cannes, which he was attending on Thursday, would be to resolve the financial crisis in Europe.

Ultimatum given

On Wednesday, German and French leaders told Papandreou at a news conference in Cannes that saving the euro was ultimately more important to them than rescuing Greece.

Angela Merkel, the German chancellor, said the stabilisation of the euro could be better achieved “with Greece than without Greece”, but added that stabilising the currency was more important.

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

Papandreou said he hoped to get more support from Greeks than he was able to get from parliament [Reuters]

Papandreou 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.

“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.

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.”

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.

Markets rattled

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.

“It has to be depended mainly on Europe to resolve the European debt problem

– Chinese president Hu Jintao

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 eurozone’s bailout fund, given the lack of detail on proposals to leverage it.

China lectures Europe 

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 before 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.”

Source: Al Jazeera, News Agencies


Al Jazeera takes a closer look at why the eurozone debt crisis matters, and possible solutions to the problem.

27 Oct 2011
More from News
Most Read