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Europe

EU leaders scramble to defuse Greek debt ‘bomb’

Text by FRANCE 24

Latest update : 2011-11-02

World leaders are gathering in the southern French city of Cannes for the G20 economic summit, but Greece’s continuing debt crisis threatened to overshadow the global event before it began.

An emergency meeting of European leaders to discuss Greece’s ongoing debt crisis was held in the French city of Cannes on Wednesday evening. French President Nicolas Sarkozy and German Chancellor Angela Merkel summoned Greece’s George Papandreou to Cannes to provide clarity on his proposed referendum on the EU’s latest bailout deal, an unexpected move that took many by surprise.

The special gathering preceded the two-day G20 global economic summit, which will start in Cannes on Thursday. The meeting is expected to cover a wide array of issues, including reviving global growth, establishing new currency policies and helping developing countries expand their infrastructure. However, Greece looked set to overshadow the meeting’s agenda.

Last week, heads of European states and banks put together a deal to buttress Greece’s finances and slash much of its privately-held debt. But Papandreou stunned his partners in the 17-member Eurozone by calling a national referendum on the 130 billion-euro agreement on Monday. The announcement sent stock markets plummeting the next day.

FRANCE 24’s special correspondent Markus Karlsson said Cannes was buzzing with speculation over whether the EU and International Monetary Fund would hold back on more aid to Greece before its referendum. “Greece is supposed to run out of money in mid-November. No more bailout money from Europe and the IMF could hurt Athens,” Karlsson said.

IMF board sources told the AFP news agency on Wednesday that Greece would not receive an urgently needed 8 billion euro aid instalment this month until after a referendum. Creditors wanted to be sure that Athens would stick to its austerity programme, the sources said.

An additional mini-summit for some eurozone leaders on Thursday morning was called by French President Nicolas Sarkozy, his office said on Wednesday evening. The meeting, still on the sidelines of the G20, will bring together the leaders of Germany, Italy, Spain and France, but also representatives from the European Central Bank, the European Commission and the European Council.

In defense of the bailout deal

The crisis meeting on the eve of the G20 gathering was preceded and followed by carefully-worded declarations from Europe’s leaders. Before heading to southern France, Germany’s Merkel said she wanted last week’s bailout deal to be put into practice, and that leaders needed “clarity” from Athens on Wednesday night.

Euro Group head and Luxembourg Prime Minister Jean-Claude Juncker had harsher words for his Greek counterpart. “One week ago we made a decision as a 17-member group, we will not accept that one person disassociates themselves from the decision taken by the 17,” Juncker announced.

Some speculation also revolved around the exact nature of the Greek referendum, with some calling for the popular vote to be held on euro membership. Athens tried to calm fears about the country abandonning the single currency. “"No, [membership] will not be the issue. It will be the bailout plan," said Greek government spokesman Angelos Tolkas, according to the Reuters news agency.

In Cannes, IMF chief Christine Lagarde also urged Europe to stick to the bailout plan despite the announcement of the referendum.

Lagarde told reporters after meetings with Sarkozy and Merkel on Wednesday that what mattered was "the resilience and the determination of the European partners to take the matter forward to implement the agreement.”

Date created : 2011-11-02

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