Greek Prime Minister, George Papandreou’s, government is on the brink of collapse following his shocking announcement of a referendum on the country’s bailout package.
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There are doubts as to whether he will survive a confidence vote on Friday, following defections from within his own party.
One rebel PM is calling for elections:
“The lies are over. It’s a time for all to take responsibility – especially the government, but also the opposition. The only realistic proposal right now for the country to avoid collapse is what I proposed three days ago – to set up a government of national unity under the president immediately. Its goal should be to save the deal of October 26-27. Early elections should be called immediately.”
Finance Minister, Evangelos Venizelos, has also broken ranks with his PM after initially supporting the referendum. He changed his mind after an emergency meeting in Cannes ahead of the G20 summit.
German Chancellor, Angela Merkel and French President, Nicola Sarkozy, told the embattled PM that Greece would not receive any more aid until it votes to meet its commitments.
The country reportedly has enough cash to last until mid-December. But Reuters’ Breaking Views Editor, Peter Thal Larsen, says Europe isn’t yet prepared to handle the consequences of withholding funding.
“If Europe is going to make that threat credibly, it would have to do a couple of things. It would have to prepare its banks for a bigger recapitalization, it would have to beef up its bailout facility, and it would probably have to get the ECB to go all in and be prepared to start buying government bonds in large quantities.”
Papandreou’s announcement of a referendum on Monday sent markets and leaders into a panic, as the possibility of a Greek default became more likely.
But despite calls to stand down, the Greek Prime Minister says he won’t resign.
Bottom line: Greek Prime Minister, George Papandreou’s, position is looking precarious ahead of a confidence vote, following a backlash against his referendum plans.