ATHENS: The Greek government faced possible collapse Tuesday as ruling party lawmakers demanded Prime Minister George Papandreou resign for throwing the nation’s euro membership into jeopardy with a shock call for a referendum.
Caught unawares by his high-stakes gamble, the leaders of France and Germany summoned Papandreou to crisis talks in Cannes Wednesday to push for a quick implementation of Greece’s new bailout deal ahead of a summit of the G-20 major world economies.
The euro and global stocks were pummelled on financial markets after the Greek move threw into question the survival of crucial efforts to contain the eurozone’s sovereign debt crisis.
Six senior members of Greece’s ruling PASOK socialists, angered by his decision to call a plebiscite on the 130 billion euro ($178 billion) rescue package agreed only last week, said Papandreou should make way for a “politically legitimate” administration.
Papandreou chaired a Cabinet meeting, expanded to include more ministers after the referendum bombshell, where he was expected to fend off demands to call a snap election.A leading PASOK lawmaker quit the party, narrowing Papandreou’s slim majority to 152 of 300 seats, and several others called for a government of national unity followed by a snap election, which the opposition also demanded.
Papandreou needs 151 votes to enact the referendum. If any of the dissenters votes against, it cannot be held. But his first hurdle is a vote of confidence Friday.
Papandreou told the Cabinet he believed he would both win the vote and hold the referendum as planned.
“We believe the government will once again win a vote of confidence in order to proceed with its plans,” government spokesman Angelos Tolkas told reporters. “We will not back down on anything we have to do to save the country.”
Eurozone leaders thrashed out Greece’s second financial rescue since last year, in return for yet more austerity, in the hope that it would ease uncertainty surrounding the future of the 17-nation single currency.
Instead, financial markets suffered another bout of turmoil Tuesday due to the new political uncertainty and the risk that austerity-weary Greeks could reject the bailout. Opinion polls suggest most voters think it is a bad deal.
The euro fell nearly 3 U.S. cents and the risk premium on Italian bonds over safe-haven German Bunds hit a euro-lifetime high, raising Rome’s borrowing costs to levels that proved unsustainable for Ireland and Portugal.
European bank shares dived on fears of a disorderly Greek default.