THE GREEK government is teetering on the brink of collapse after a day of infighting left Prime Minister George Papandreou, without a political majority, taking a referendum on Athens’ bailout package off the table.
Political skirmishes also spread to the world stage as leaders at the G20 summit in Cannes considered whether to double the size of the International Monetary Fund (IMF), and spoke for the first time about the prospect of Greece leaving the single currency.
Numerous politicians in the UK and abroad have balked at the idea of putting up more cash to support ailing Eurozone economies through the IMF.
But Prime Minister David Cameron insisted at the summit yesterday that it was in Britain’s economic interest to offer to underwrite billions of pounds in IMF loans. More detail from the G20 is expected today.
Even if Greece can avoid default through its current bailout and the support of a beefed-up IMF, world leaders have for the first time spoken openly about Greece possibly exiting the euro.
Breaking with convention, French President Nicolas Sarkozy said it was up to the Greek people to decide their future: “The question is whether Greece remains in the Eurozone, that is what we want. But it is up to the Greek people to answer that question.”
Greek politicians seemed far from answering the question yesterday, as a rebellion led by finance minister Evangelos Venizelos helped force Papandreou to cancel any referendum on either the current bailout package or Greece’s membership of the euro.
International lenders have already suspended Greece’s next €8bn (£6.9bn) instalment of aid, leading to a sovereign bankruptcy within weeks unless Athens politicians come to a deal.
A Greek default would pave the way for its disorderly exit from the euro.
Yesterday evening, opposition leader Antonis Samaras demanded that Papandreou resign after negotiations over the formation of a unity government broke down.
Papandreou’s ruling Socialist party faces a confidence vote today, but rumours swirled last night that he has cut a deal to stand down even if the government wins the vote.
It also emerged yesterday that the entire referendum plan could have been little more than a gambit in order to force more concessions out of Germany and France.
Announcing that he had scrapped the plan, Papandreou declared: “I will be glad even if we don’t go to a referendum, which was never a purpose in itself. I’m glad that all this discussion has at least brought a lot of people back to their senses.”
As a negotiating tactic, it appears to have had the opposite of its intended effect, causing Eurozone leaders to harden their stance and eroding Papandreou’s political support.