Time and luck running out for Papandreou, despite U-turn

 

Athens

In a dramatic reversal yesterday, Greece's Prime Minister scrapped plans for a referendum on the euro and was fighting a rebellion in his own party that has left the government on the brink of collapse.

George Papandreou resisted pressure to resign, both from his own party colleagues and the opposition, which ealier offered to back the EU's proposed rescue package on condition that the Prime Minister stepped down.

After a bruising day which ended with both sides accusing each other of playing politics with the future of the country, Mr Papandreou now faces a confidence vote in parliament that rests on a knife edge. A "no" vote this evening would result in a snap election and further turmoil for a nation whose debt crisis has propelled the eurozone into an existential crisis.

In a fist-banging address to parliament late last night the Greek premier made an impassioned plea to the opposition to put aside "tactics" and join a broad-based coalition to "save Greece from catastrophe". In return he offered to step aside at elections that would be called after the EU's rescue package has been passed by Greek lawmakers.

The opposition leader, Antonis Samaras – once his opponent's roommate at a US college – rebuked the Prime Minister over his handling of the crisis and led a walkout of conservative MPs: "He's lying, he's blackmailing, all to hold on to his position," he told parliament.

The spat appeared to have ended hopes, kindled in the afternoon, that the pair would put aside their differences and form a unity government – something that has long been desired by the rest of Europe and the US.

The Greek conservatives abandoned their previous opposition to the bailout package agreed at last week's EU summit but demanded the resignation of Mr Papandreou, whose unexpected call for a euro referendum in Greece threw markets and governments into shock this week.

Mr Papandreou, who has been savaged in the Greek media and criticised by former friends in the rest of Europe, said that opposition demands for early elections would create a "dangerous power vacuum".

He appeared to rule out standing for a second term and called for the opposition to rejoin talks on a unity government but shied away from explaining his own dramatic about-turn on the referendum that he had insisted on since Monday. Markets welcomed the decision to back down on putting EU plans to Greek voters, whose opposition to austerity programmes has been marked by mass protests and rioting.

The drama in Athens began with a statement in the early hours of yesterday morning from the Finance Minister, Evangelos Venizelos, rejecting the need for a referendum: "Greece's position within the euro area cannot be put in doubt," he said. "It cannot depend on a referendum."

The timing of his decision to break ranks with his Prime Minister, immediately on return from Cannes where the pair had faced angry criticism from Greece's EU colleagues, appeared to designed to topple his boss. The political veteran unsuccessfully challenged Mr Papandreou for the leadership of Pasok four years ago and demanded the title of Deputy Prime Minister in return for propping up his administration.

An emergency cabinet meeting followed in the afternoon at which divisions within the ruling socialists, Pasok, emerged. Speculation over the next steps reached fever pitch when a delegation from Pasok met their conservative rivals New Democracy for talks on the make-up of a potential transitional government. More than 20 Pasok MPs were ready to join a unity government but no one was ready to risk leading it.

A proposal to look beyond parliament for a government of all the talents, including the former vice president of the European Central Bank, Lucas Papademos, briefly gained currency.

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