The proposal threatens Greece’s adherence to the terms of a new deal with its foreign lenders and has plunged Europe into a fresh bout of financial turmoil.
But several lawmakers in the governing Socialist Party rejected the plan, raising the possibility that Mr. Papandreou will not survive a no-confidence vote scheduled for Friday that depends on his holding together a razor-thin parliamentary majority.
An emergency cabinet meeting convened by Mr. Papandreou ended at 3 a.m. with the cabinet saying that it unanimously supported the prime minister’s call for a referendum, local news outlets reported. The opposition and some members of his own party, however, were calling for new elections immediately.
Despite the political turmoil provoked by Mr. Papandreou’s call for a referendum, the prime minister appeared to have rallied his troops behind him after the seven-hour cabinet meeting.
The Greek government spokesman, Elias Mossialos, said the government aimed to hold the referendum “as soon as possible” — “on the condition” that Greece had the “basic elements, not the full agreement” of the loan deal with the European Union in place. News reports on Wednesday said the referendum might be brought forward as soon as December.
The political atmosphere remained tense and chaotic, with politicians both in the government and in the opposition maneuvering intensely ahead of the confidence vote.
The leader of the center-right opposition, Antonis Samaras, repeated calls on Wednesday for early elections but did not ask his legislators to resign, as he had hinted he might do, a move that would have immediately led to early elections. The next general election is not due until 2013.
Still, the political instability in Athens seemed likely to delay — and perhaps scuttle — the debt deal that European leaders reached after marathon negotiations in Brussels last week.
Financial markets in Europe rallied on Wednesday after two days of losses that had wiped out the gains since the Brussels deal was announced last week. Some analysts said that Greece was now coming closer to a messy default on its debt, and perhaps a departure from the zone of 17 countries that use the euro as their common currency.
Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, apparently caught off guard by Mr. Papandreou’s call for a referendum and then by the disarray in his party, said they would hold emergency talks on Greece with euro zone leaders on Wednesday. They said they also planned to meet with representatives of the Greek government before a critical meeting of the Group of 20 advanced and emerging economies on Thursday, and they defended the terms of the bailout package as “more necessary than ever today.”
The chairman of the euro zone finance ministers, Jean-Claude Juncker, warned that the plan to hold a referendum endangered an $11 billion loan that Greece is to receive under the bailout deal, and that Greece urgently needed to avoid a default. Mr. Juncker, who is the prime minister of Luxembourg, said Greece could face bankruptcy if it votes no on the bailout.
The big fear is that a decisive turn against the bailout package in Greece could undermine European efforts to enforce deep budget cuts in other heavily indebted European countries, especially Italy, which is mired in its own political crisis and has a far larger economy and much more debt than Greece.
Political analysts and several advisers to Mr. Papandreou said the prime minister had decided to announce a popular referendum on Monday night as his last best hope to shore up his eroded political standing. They said he wanted to put Greece’s fate back in the hands of the Greek people and to force his many opponents — both inside his government and in the opposition — to coalesce around the idea that what is at stake is Greece’s membership in the euro zone.
Mr. Papandreou wanted Greek voters “to take a position, to see the choice before us in its starkness, hoping they will back the lesser of two evils, instead of letting irate reactions in the streets dominate the debate,” said one adviser to the prime minister.
Dimitris Bounias contributed reporting from Athens, and Stephen Castle from Brussels.
Article source: http://www.nytimes.com/2011/11/03/world/europe/greek-cabinet-backs-call-for-referendum-on-debt-crisis.html?partner=rss&emc=rss