Greek PM drops euro referendum plan

 

Greece's prime minister has abandoned his explosive plan to put a European rescue deal to a referendum.

George Papandreou opened emergency talks with his opponents, who performed a U-turn and agreed to broad austerity measures in exchange for a European bailout.

Mr Papandreou ignored widespread calls for his resignation and instead invited the opposition to join negotiations on the bailout.

He told an emergency Cabinet meeting that early elections would force Greece into leaving the euro, with disastrous effects for both Greece and other European economies.

Mr Papandreou sparked a global crisis on Monday when he announced he would put the latest European deal to cut Greece's massive debts - an accord that took months of negotiations - to a referendum.

The idea horrified other EU nations and Greece's creditors, triggering turmoil in financial markets as investors fretted over the prospect of Greece being forced into a disorderly default.

Two officials close to Mr Papandreou said today the referendum idea has now been scrapped, after the debt deal won support from the opposition.

Mr Papandreou spoke to conservative opposition leader Antonis Samaras in the afternoon, his office said, before a major address to his Socialist party deputies in parliament.

Speaking to his ministers, Mr Papandreou said his proposal to hold a referendum "has at least brought many people toward a rational view" of Greece's dire economic situation. Several Greek MPs had called for a coalition unity government to approve the bailout package without a referendum, but Mr Papandreou said stepping down would make things worse.

"Elections as a solution, today and at this moment, would mean a much greater danger of bankruptcy and of course exit from the euro," he said.

The drama in Greece sent immediate ripples throughout Europe.

Premier Silvio Berlusconi's government in Italy was teetering as well after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout.

The European Central Bank made a surprise decision to cut interest rates by a quarter of a percentage point, to 1.25%, in an acknowledgement of the fragility of the continent's finances.

Talk of Greece also dominated the G20 summit in the French resort of Cannes, where the leaders of the world's economic powerhouses gathered to solve Europe's debt crisis, which threatens to push the world back into recession.

Mr Papandreou flew to Cannes on Wednesday, where French President Nicolas Sarkozy and German Chancellor Angela Merkel told him Greece would not get the latest funds from its existing bailout until after any referendum. They also said any referendum should be on whether Greece wants to stay in the eurozone or not.

After returning to Greece with him, his finance minister, Evangelos Venizelos, broke ranks and declared his opposition to a referendum. "Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt," he said.

Me Venizelos said the country's attention should instead be focused on quickly getting a crucial eight billion euro (£6.9 billion) instalment of international bailout funds, without which it faces bankruptcy within weeks.

Mr Papandreou said today he never intended to hold a referendum on Greece's use of the euro, but was simply seeking broader Greek approval for the bailout plan.

Greece's new debt deal would give the country an extra 100 billion euro (£86 billion) in rescue loans from the rest of the eurozone and the IMF - on top of the 110 billion euro (£95 billion) it was granted a year ago.

It would also see banks write off 50% of the money Athens still owes them. The goal of the programme is to reduce Greece's massive debts to the point where the country is able to handle its finances without constant bailouts.

The political drama is not over.

Mr Papandreou has called a confidence vote on his government for Friday night, and his majority was reduced to the bare minimum when Socialist MP Eva Kaili said she would not vote in favour.

The two other European governments besides Greece that have received bailouts - Portugal and Ireland - have seen their governments fall during the economic turmoil.

Suggested Topics
PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
News
Lane Del Rey performing on the Pyramid Stage at Glastonbury 2014
people... but none of them helped me get a record deal, insists Lana Del Rey
Life and Style
fashion Designs are part of feminist art project by a British student
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
News
i100
Arts and Entertainment
British author Howard Jacobson has been long-listed for the Man Booker Prize
books
Life and Style
tech
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Sport
Louis van Gaal watches over Nani
transfers
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
transfersColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Senior Private Client Solicitor - Gloucestershire

Excellent Salary: Austen Lloyd: Senior Private Client Solicitor - We are makin...

Microsoft Dynamics AX Support Developer

£50000 per annum + benefits: Progressive Recruitment: A unique and rare opport...

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

People Change Manager

£260 - £325 per day: Progressive Recruitment: IT Trainer: E-Commerce Experienc...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn