Greek cabinet supports call for referendum on bailout

European leaders meet Papandreou in Cannes for emergency talks ahead of G20 summit today. Germany tells Greece eurozone plan to save country from bankruptcy is not up for renegotiation.

ATHENS / CANNES – Greece’s cabinet voted Wednesday to support Prime Minister George Papandreou’s call for a referendum as soon as possible on the latest bailout plan, as Europe’s stock markets watched anxiously to see what might happen next, CNN Said.

The vote was unanimous, though some of the ministers expressed criticism prior to casting their votes, CNN affiliate Mega Channel reported.

The cabinet vote came hours before German Chancellor Angela Merkel, French President Nicolas Sarkozy and senior figures from the International Monetary Fund and European Union were to meet Wednesday with Greek officials at an emergency meeting in Cannes, France, ahead of the G-20 summit.

Their meeting comes a day after U.S. and European stock markets tumbled following Papandreou’s call for the referendum on international aid for his country. German and French markets rallied slightly Wednesday after closing down about 5% Tuesday, while London’s FTSE remained fairly flat as of midday trading. Analysts said the Dow Jones Industrial Average index was headed for a flat open Wednesday.

Papandreou is seeking public backing from the Greek people for last week’s bailout deal, which took months to reach. But the move created turmoil in domestic politics and angered his European counterparts. A “no” vote could theoretically force Greece to crash out of the euro and send shock waves through the global financial system.

Sarkozy and Merkel issued a terse statement on Tuesday saying they were “determined to ensure the full implementation, without delay, of decisions adopted by the summit, which are necessary now more than ever.” White House spokesman Jay Carney struck a similar note, saying Papandreou’s move reinforced the need for Europe “to elaborate further and implement rapidly the decisions they made last week.”

Moreover, Germany warned that the eurozone plan to save Greece from bankruptcy is not up for renegotiation, according to the BBC. “[What] we just agreed last week cannot be placed back on the table,” Foreign Minister Guido Westerwelle said.

G20 summit in confusion

According to BBC correspondents, the summit of G20 global leaders has been thrown into confusion before it even opens today. President Sarkozy had thought the priority would be presenting to the wider world a done deal for the Eurozone rescue and asking for active international support, particularly from China.

But instead, Papandreou’s move has left Sarkozy and Merkel appalled by the uncertainty, and the damage already done.

Papandreou was expected to say that he had no choice: a referendum was vital to try to overcome resistance on the streets to deepening cuts – and a possible alternative of snap elections would risk Greece defaulting on its debt.

The planned referendum threatens to unravel a deal reached at a EU summit last week aimed at resolving the euro debt crisis. Leaders agreed on a EUR 100 bln loan to Athens and a 50% debt write-off. But in return, Greece must make deep cuts in public spending, slashing pensions and wages and making thousands of civil servants redundant. There have been widespread protests in Greece against the measures.

Russia offers USD 10 bln for Eurozone bailout

Arkady Dvorkovich, economic adviser to the Russian president, told a RIA Novosti briefing that Russia was ready to help stabilize the European economy via the IMF. The government indicated it was ready to allocate up to USD 10 billion. It looks like Russia has followed China’s lead, after China offered to join the European Financial Stability Facility (EFSF) – the bailout fund created to fight the debt crisis currently plaguing Europe.

“Europe’s continued stability matters to us,” Dvorkovich told RIA Novosti. “Europe is our biggest trade and investment partner. If Europe is unstable, Russia’s economy will also enter a phase of instability.”

Orban: Negative vote in Greek referendum could have dramatic results

European Affairs Minister Leonard Orban stated in an interview to RFI that “the Greek prime-minister’s decision stirred considerable concern in all EU member states, both within and outside the euro zone.”

“The consequences of a ‘NO’ in this referendum may be unpredictable and could influence not only the evolution of the euro zone, but also the evolution of the European Union at large. Clearly, if this referendum is maintained, we will have to help to the best of our ability to ensure a positive result,” the minister explained. Leonard Orban argues that a negative vote in the Greek referendum concerning the European plan to bail out the Greek state would have “dramatic consequences”. “There is a risk of default in Greece’s case. Secondly, there is a risk that Greece may be expelled from the euro zone, with all the consequences this could visit on this area and on the EU at large. These matters will certainly put a great strain on the banking system, not only in Greece, but also across the European Union.”

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