Germany and France told Greece on Wednesday it should make up its mind by mid-December whether it wants to stay in the euro zone when Greeks vote on a 130-billion-euro ($178 billion) bailout.
French President Nicolas Sarkozy and Germany?s Angela Merkel summoned George Papandreou for crisis talks in Cannes, before a G20 summit of major world economies, to push for rapid implementation of measures to tackle the euro zone debt crisis, which Athens has thrown into doubt.
Sarkozy said Papandreou?s announcement of a referendum ?took the whole of Europe by surprise? and his prime minister, Francois Fillon, told parliament: ?Europe cannot be kept waiting for weeks for the outcome of the referendum.
?The Greeks must say quickly and without ambiguity whether they choose to keep their place in the euro zone or not.? Opinion polls suggest most Greeks think the deal thrashed out by euro zone leaders last week is a bad one, but much will depend on how Papandreou frames the debate, either on the bailout — and the painful cuts it demands — or membership of the euro, which remains popular.
Greece?s European partners will press for the latter.
German Chancellor Merkel struck the same tone of exasperation and impatience as Fillon in comments before flying to Cannes for hastily arranged meetings of European Union policymakers (1630 GMT) and with Papandreou (1930 GMT).
?We agreed a plan for Greece last week. We want to put this plan into practice, but for this we need clarity and the meeting tonight should help with precisely this,? she told a news conference with Turkish Prime Minister Tayyip Erdogan.
Germany?s finance ministry hinted that European partners and the International Monetary Fund may withhold the next 8 billion euro aid instalment to Athens, due this month, until after the referendum.
?The tranche has not yet been paid. That is the situation today. How things proceed is yet to be seen. But according to everything we hear from Greece, there is no urgent need for the payout until mid-December, more or less,? finance ministry spokesman Martin Kotthaus said.
EU leaders endorsed the disbursement of the money last week, but the IMF board has yet to set a date for a decision. An IMF source said the way forward would depend on the outcome of Wednesday?s EU talks with Papandreou, which IMF Managing Director Christine Lagarde will join.
French officials said Papandreou would be pressed to put the bailout deal to parliament first in hopes of reassuring financial markets which panicked when he called the plebiscite.
Win or lose, his gamble guarantees weeks of uncertainty just as the 17-nation European currency area is desperate for a period of calm to implement the remedies agreed to corral its sovereign debt crisis.
Some in Papandreou?s party called for him to quit, accusing him of endangering euro membership with his shock decision to call a popular vote, a move that pummelled the euro and stocks.
The Socialist prime minister battled late into the night to win cabinet support, giving him at least a stay of execution before a confidence vote in parliament on Friday.
?The referendum will be a clear mandate and a clear message inside and outside Greece on our European course and participation in the euro,? Papandreou told a cabinet meeting that lasted seven hours.
European Commission chief Jose Manuel Barroso urged Greeks to unite in support of the bailout plan, warning that the alternative would be too ghastly to predict.
?Without the agreement of Greece to the EU/IMF programme, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee,? he said.
If Papandreou wins the confidence vote, the euro zone faces a period of policy vacuum in which markets can create havoc. If he loses, Greece faces a disorderly default which would hammer Europe?s banks and threaten the much larger economies of Italy and Spain, which the bloc may not have the means to bail out.
As a result, the Greek premier?s move has aroused anger and surprise in equal measure around the world.
?That?s enough now: Greeks out!? Kronen Zeitung, Austria?s biggest-selling paper, said on its front page.
The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package and Japanese Finance Minister Jun Azumi said: ?Everyone is bewildered.? Juncker, European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, IMF chief Christine Lagarde and an ECB official will also attend Wednesday?s talks in the southern French resort town.
Doubt about Europe?s ability to contain the debt crisis has once more sent markets into a spin and put Italy firmly in the firing line.
The risk premium on Italian bonds over safe-haven German Bunds hit a euro-lifetime high on Tuesday, despite European Central Bank buying of its bonds.
Ireland?s finance minister said the ECB would be forced to pledge ?a wall of money? to buy bonds, something many of its policymakers are deeply uncomfortable about.
Until the Greek situation is clearer, last week?s package of measures is likely to be in limbo, leaving the ECB as the only bulwark against market attacks.
The head of Germany?s banking association, Michael Kemmer, said agreement on a 50 percent writedown of Greek debt by its private creditors would have to wait. ?I can?t imagine a debt exchange taking place before the referendum,? he said.
Greek Conservative opposition leader Antonis Samaras said Papandreou had acted as a one-man roadblock.
?How can banks accept a haircut on their debt if they don?t know if Greece accepts it in the first place?? he told lawmakers in a speech. ?Papandreou has put the country in the centre of a global storm … a government in such a state of panic is dangerous and must leave as soon as possible.? Meanwhile, another premier under fire, Italy?s Silvio Berlusconi scrambled to come up with measures to placate markets, seeing senior aides and ministers ahead of an expected meeting of the cabinet later.
Greek government spokesman Ilias Mosialos said the referendum would take place ?as soon as possible, right after the basics of the bailout deal are formulated?.
Greek officials had suggested it would probably be held in mid-January but the interior minister said it could happen as early as December.
The Greek press, including dailies traditionally friendly to the government, almost unanimously condemned Papandreou.
Centre-left newspaper Eleftherotypia described the prime minister on its front page as ?The Lord of Chaos?. Ethnos, another pro-government paper, called the referendum ?suicidal?. [Reuters]