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Greek cabinet backs George Papandreou's referendum plan | |
(40 minutes later) | |
Greece's cabinet has given unanimous backing to a controversial plan by PM George Papandreou to hold a referendum on a EU debt rescue package. | |
He told an emergency cabinet meeting that a referendum would offer "a clear mandate" for austerity measures demanded by other eurozone members. | |
Stock markets recorded big drops amid shocked reactions in eurozone capitals to the referendum announcement. | |
Mr Papandreou is due to meet European leaders in France on Wednesday. | Mr Papandreou is due to meet European leaders in France on Wednesday. |
In a cabinet meeting lasting late into Tuesday night, Mr Papandreou told ministers the government needed the consent of the Greek people. | |
In a statement released by his office, he said: "The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro." | |
Mr Papandreou also said a possible alternative of snap elections would risk Greece defaulting on its debt. | |
The Greek government faces a crucial confidence vote in parliament on Friday. | The Greek government faces a crucial confidence vote in parliament on Friday. |
Following the seven-hour meeting, government spokesman Elias Mossialos said: "The cabinet expressed its support." | |
"The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated," he added. | |
Monday's referendum announcement led to sharp falls on world markets on Tuesday. Asian markets also continued their slide on Wednesday. | |
The planned referendum threatened to unravel a deal reached at a EU summit last week aimed at resolving the euro debt crisis. | |
Leaders agreed on a 100bn-euro loan (£86bn; $140bn) to Athens and a 50% debt write-off. | Leaders agreed on a 100bn-euro loan (£86bn; $140bn) 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. | But in return, Greece must make deep cuts in public spending, slashing pensions and wages and making thousands of civil servants redundant. |
There have widespread protests in Greece against the measures. | |
Bailout stands | Bailout stands |
On Tuesday President Nicolas Sarkozy of France said Mr Papandreou's decision "surprised all of Europe". | |
The French and German governments said they wanted "full implementation" of the agreement "in the quickest time frame". | |
Mr Papandreou is to hold hastily arranged talks on Wednesday with Mr Sarkozy and German Chancellor Angela Merkel, on the sidelines of a G20 summit in France. | |
In a joint statement, President Sarkozy and Chancellor Merkel said the decisions taken by last week's EU summit were "more necessary than ever". | In a joint statement, President Sarkozy and Chancellor Merkel said the decisions taken by last week's EU summit were "more necessary than ever". |
"France and Germany are convinced that this agreement will allow Greece to return to sustainable growth," they said. | "France and Germany are convinced that this agreement will allow Greece to return to sustainable growth," they said. |
Last week's marathon EU summit was intended to rescue Greece and bringing the 17-nation eurozone back from the brink of disaster. | Last week's marathon EU summit was intended to rescue Greece and bringing the 17-nation eurozone back from the brink of disaster. |
Eurozone chief Jean-Claude Juncker said if a referendum rejected the bailout, it could mean bankruptcy for Greece. | Eurozone chief Jean-Claude Juncker said if a referendum rejected the bailout, it could mean bankruptcy for Greece. |
"It will depend on the manner in which the question will be exactly formulated and on what the Greeks exactly vote on," he said. | "It will depend on the manner in which the question will be exactly formulated and on what the Greeks exactly vote on," he said. |
Confidence vote | Confidence vote |
Some Greek government ministers had been unaware of the referendum plan until it was announced. | |
The announcement even took Greece's Finance Minister Evangelos Venizelos by surprise, Greek media reported. | |
One MP from the governing Pasok party has resigned, cutting Mr Papandreou's parliament majority to two ahead of Friday's confidence vote. | One MP from the governing Pasok party has resigned, cutting Mr Papandreou's parliament majority to two ahead of Friday's confidence vote. |
Six other leading party members have called on him to resign. | Six other leading party members have called on him to resign. |
The Greek opposition has called for early elections, saying the referendum jeopardises Greece's EU membership. | The Greek opposition has called for early elections, saying the referendum jeopardises Greece's EU membership. |
Antonis Samaras, leader of the main opposition New Democrats, said: "In order to save himself, Mr Papandreou has posed a dilemma of blackmail that puts our future and our position in Europe in danger." | Antonis Samaras, leader of the main opposition New Democrats, said: "In order to save himself, Mr Papandreou has posed a dilemma of blackmail that puts our future and our position in Europe in danger." |