Eurozone watches as Greece heads for Dec 4 vote

Prime Minister George Papandreou plans to hold a referendum on December 4 so Greeks can decide whether their country will stay in the eurozone or return to the drachma but French President Nicolas Sarkozy and German Chancellor Angela Merkel have warned Athens it will not receive any more loans until the issue is resolved.

Papandreou, who was summoned to emergency talks with the leaders of France and Germany on the eve of a G20 summit in Cannes, said Greece could live up to the obligations required of it to stay in the single currency, but the prime minister insisted he needed a wider political consensus.

“The Greek people want us to remain in the euro zone,» he told reporters after talks with French President Nicolas Sarkozy and German Chancellor Angela Merkel. «We are part of the euro zone and we are proud to be part of the euro zone.”

“Being part of the euro zone means having many rights and also obligations. We can live up to these obligations,» Papandreou said. «I do believe there is a wide consensus among the Greek people and that’s why I want the Greek people to speak.”

Papandreou faces a confidence vote in Parliament on Friday and if he survives, he will have to put his referendum proposal to MPs. A simple majority will be enough for the motion to be carried but the ruling PASOK party only has a two-seat advantage in the House and it is not certain that the prime minister will be able to convince all his deputies to back him.

Sarkozy told a news conference: «Our Greek friends must decide whether they want to continue the journey with us.”

European leaders were angered by Papandreou’s surprise unilateral announcement on Monday of a referendum on a bailout deal reached with euro zone leaders at a summit last week.

German Chancellor Angela Merkel told the same news conference that Germany wanted to stabilise the euro zone with Greece as a member, but stabilising the euro was ultimately more important than rescuing Greece.