The Greek referendum on the latest bailout package has been called off. In an emergency meeting at the G20 summit in Cannes, Greek Prime Minister George Papandreou was told by irate European leaders that any referendum would decide ultimately on Greece leaving the eurozone.
In the previous two days, the rescue plan for Greece was in jeopardy since Papandreou announced he would put the deal to a popular vote. He said the painful austerity measures demanded by creditors could only continue with the support of the Greek people. French President Nicolas Sarkozy and German Chancellor Angela Merkel were said to be furious with the decision. Papandreuo was summoned to the G20 summit to explain the move.
It was only a week ago when European leaders breathed a collective sigh of relief. The European Commission, the European Central Bank and the International Monetary Fund had agreed on a hard-won bailout package to rescue Greece from further economic crisis.
Today, Sarkozy cautiously welcomed Papandreou’s change of heart. He said, “[W]e cannot accept an explosion of the euro, which would mean the explosion of Europe.” Meanwhile in Athens, Papandreuo is facing a confidence vote in parliament. His Socialist party only has a majority by two seats. The debate is underway now with a vote expected on Friday.
What happens if Papandreou’s government falls? What other solutions will G20 leaders devise for the continuing tumult in Europe? Is Italy the next crisis?
Tom Stoukas, Reporter with Bloomberg News, in Athens
Eleanor Beardsley, NPR correspondent in Cannes, France
Barry Ritholtz, CEO of Fusion IQ, an equity research firm; Writer, The Big Picture, a leading financial news blog; author of the book "Bailout Nation."