Greek cabinet backs referendum plan
Greece's prime minister is holding firm over his shock decision to call for a referendum on a hard-fought European debt deal, despite anger from abroad, market turmoil across the world and dissent from within his own party.
George Papandreou's government still faced a battle for survival, with a vote of confidence on Friday and a grilling from frustrated European leaders expected later in the day ahead of the Group of 20 summit in the French Riviera.
After a gruelling seven-hour Cabinet meeting that finished after 3am local time, government spokesman Ilias Mossialos said Mr Papandreou's ministers expressed "total support for the initiatives taken by the prime minister". He said the referendum would be held "as soon as possible".
However, government officials said two ministers still had strong reservations with the idea of a referendum, which will be the first in Greece since the country voted to abolish the monarchy in 1974.
Mr Papandreou told his ministers that putting the issue to the Greek people was the only way to safeguard the European deal. He said: "We will not implement any programme by force, but only with the consent of the Greek people. This is our democratic tradition and we demand that it is also respected abroad."
He said a referendum "will be a clear mandate, and a clear message within and outside of Greece, about our European course and our participation in the euro", according to a text of his speech to the meeting.
World markets were hammered after Mr Papandreou's surprise Monday night announcement amid fears the vote could unravel a deal which took European leaders months of complex negotiations among themselves and with banks to reach.
Greece's general price index plunged to close down 6.92%, while in Germany the Dax index, the major stock market average, lost 5% - the equivalent of about 600 points on the Dow. The French stock market closed down 5.4%, the Italian 6.7% and London 2.2%. The Dow Jones industrial average finished down nearly 300 points, or 2.5%.
"This announcement surprised all of Europe," said a clearly annoyed French president Nicolas Sarkozy, who will hosts leaders of the G20 major world economies from Thursday. "Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts," he said.
Mr Sarkozy and German chancellor Angela Merkel, who have been at the forefront of Europe's efforts to contain the debt crisis, talked by phone and agreed to convene emergency talks in Cannes, France, to which Mr Papandreou was also summoned to discuss implementation of the bailout.