Greek PM faces grilling on referendum

Updated November 03, 2011 10:50:21

Photo: Under pressure - George Papandreou has been widely criticised for his decision to take the bailout package to a referendum. (AFP: Louisa Gouliamaki)

Germany and France summoned Greece's prime minister for emergency talks after his shock decision to call a referendum on a 130-billion euro bailout sparked panic on global markets.

French president Nicolas Sarkozy and German chancellor Angela Merkel summoned George Papandreou to Cannes on the eve of a G20 summit of major world economies to push for rapid implementation of measures to tackle the eurozone debt crisis.

The hastily arranged meetings steadied European markets, which closed 1 per cent higher overnight after tumbling the previous day on news of the Greek referendum.

The Franco-German duo first met the heads of European Union institutions and the International Monetary Fund (IMF) on Wednesday to discuss how to limit the damage from the Greek move and apply pressure for a swift outcome.

EU and IMF board sources said Greece would not receive an urgently needed 8 billion euro ($10.6 billion) aid instalment, due this month, until after the vote, because official creditors wanted to be sure Athens would stick to its austerity program.

Mr Sarkozy has said Mr Papandreou's announcement of a referendum "took the whole of Europe by surprise" and his prime minister, Francois Fillon, told parliament: "Europe cannot be kept waiting for weeks for the outcome of the referendum.

"The Greeks must say quickly and without ambiguity whether they choose to keep their place in the euro zone or not."

Opinion polls suggest most Greeks think the deal thrashed out by euro zone leaders last week is a bad one, but much will depend on how Mr Papandreou frames the debate, either on the bailout - and the painful cuts it demands - or membership of the euro, which remains popular.

Greece's European partners will press for the latter.

Ms Merkel struck the same tone of exasperation and impatience as Mr Fillon in comments before flying to Cannes.

"We agreed a plan for Greece last week. We want to put this plan into practice, but for this we need clarity and the meeting tonight should help with precisely this," she said.

 

Markets rise

European shares rose on Wednesday, ending up 1 per cent to recoup some of the sharp losses in the previous sessions, as investors picked up battered bank stocks.

Germany's DAX index ended up 2.25 per cent to 5,966 and France's CAC 40 closed 1.4 per cent higher at 3,111.

London's FTSE 100 ended the day 1.2 per cent higher to 5,484.

The US share market gained as buyers sought bargains amid the fallout from the turmoil in Europe.

It also was boosted by the release of positive jobs figures but fell later in the day after the Federal Reserve lowered its outlook for economic growth in 2012.

The Dow Jones Industrial Average closed up 1.5 per cent at 11,836, the S&P 500 closed up 1.6 per cent to 1,238. 

And the Nasdaq finished up 1.3 per cent at 2,640.

In a sign of the severity of the market chaos caused by the referendum plan, the eurozone's bailout fund decided to suspend its next fundraising operation for Ireland.

The 3 billion euro operation "has been put on hold," the spokesman of the European Financial Stability Facility (EFSF) Christof Roche said, citing the "deterioration of market conditions."

"We will conduct this operation in the near future but no longer this week," Mr Roche added.

The EFSF has the power to raise funds in the financial markets in order to provide loans to bailed out nations, with lower interest rates than they would get on their own.

Greek PM faces grilling on referendum - ABC News (Australian Broadcasting Corporation)