The Greek government has scrapped plans to hold a referendum on the eurozone bailout, as pressure mounts on Greek Prime Minister George Papandreou.
In a speech to his Pasok party MPs, the prime minister said if the opposition New Democracy party agreed to vote for the bailout plan in parliament there would be no need for a national poll.
"If the opposition is willing to negotiate then we are ready to ratify this deal and implement it," he said.
Papandreou said that a rejection of a referendum would have led inevitably to a withdrawal from the single currency. To avoid that doomsday scenario there now existed "a new political position" of cross-party co-operation.
The only other alternative would have been to hold a national election, but that would have bankrupted the country, Papandreou said.
The PM added that the frantic reaction to the proposal for a referendum, planned for 4 December, had been a "beneficial shock", and claimed that Greece would be stronger with its politicians working together. He also urged his MPs to vote in a confidence poll to be held on Friday.
Evangelos Venizelos, Pasok deputy leader, went further than Papandreau, stating in a speech following the leader's address that Greece "must say it is not holding the referendum".
He also said that the bailout must be passed by at least 180 of the country's 300 MPs.
Papandreou has faced pressure to resign over the proposal to let the public vote on a €8bn rescue package which many Greeks fear will impose years of austerity on their country.
Rumours spread on Thursday that Papandreou intended to quit his post following opposition to the referendum plan from his own party, including the finance minister Evangelos Venizelos.
It had been reported that he intended to visit the president in order to tender his resignation in order to pave the way for the formation of a coalition government under the leadership of Lucas Papademos, the former head of the Greek central bank.
But Papandreou has reportedly told his cabinet he has no intention on stepping down and his office has said there is "no planned meeting" between the prime minister and president.
Eva Kaili, a MP and member of Papandreou's Socialist Party, has been among those calling on him to quit.
She told the BBC World Service: ''I think now the only solution is to have a new government of national rescue and co-operation led by a person that is recognised by the majority [as] prime minister and tries to uphold the [bailout] agreement of 26 October."
Antonis Samaras, the leader of the conservative New Democracy opposition party had earlier called for the establishment of a transitional government and for the parliament to agree to the 8bn-euro bailout as soon as possible.
"I'm asking for the formation of a temporary, transitional government with an exclusive mandate to immediately hold elections. And the ratification of the bailout deal from the current parliament," he said in a statement.
The decision to hold referendum stunned European leaders and has cast a shadow over the G20 meeting in Cannes.
A confidence vote in the Greek government is expected to go ahead on Friday.
As confusion regined in Athens and Cannes, the new chief of the European Central Bank Mario Draghi cut interest rates by 0.25%.
Following the change the FTSE 100 in London improved rose by 1.09%, or 60 points, to 5,544. Germany’s DAX rose 3.04% to 6,147 and in Paris the CAC 40 index rose 2.6% to 3,192.
03/11/2011 20:38 GMT
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03/11/2011 19:58 GMT
Reuters: Papandreou Will Step Down If Coalition Formed
Reuters is reporting that the Greek PM 'will stand down' if a coalition government is formed.
They quote an unnamed government source to support the story.
There is no other confirmation of that line as of yet.
03/11/2011 18:37 GMT
New Democracy Withdraws From Confidence Debate
"Samaras requests once again that Papandreou resigns, and that elections be held. He complains that Papandreou defames him in meetings with foreign leaders. He continues with a comparison to George Papandreou (the grandfather of the current premier), and the prevention of a vote in 1965. He contrasts this with 2011, where there are no elections because George Papandreou (the current premier) refuses them. “History repeats itself … as a farce.”
Harsh, brutal and perhaps unnecessary words. Given the vitriol, it’s very hard to see how these two politicians will agree on a government of national unity.
New Democracy is now withdrawing from the debate on the vote of confidence in the government.
Negotiations no doubt continue. But the terms are clear—the gauntlet has been thrown. George Papandreou will have to resign if he really wants a government of national unity."
03/11/2011 17:58 GMT
Reports: Greek PM Asked To Resign
Reuters is reporting that Antonis Samaras, the leader of the Greek opposition, has asked the PM to resign.
03/11/2011 17:57 GMT
George Osborne: Sense Of Urgency
There is no doubt that there is a real sense of urgency in the room and a real sense of urgency from every individual that I have heard.
There was also an emphasis on the need for specific actions to come out of our discussion ... The eurozone has taken significant decisions.
The question that people have is are they willing to implement those decisions.
03/11/2011 17:00 GMT
Venizelos: Greece Must Say It Is Not Holding A Referendum
Evangelos Venizelos, the deputy leader of Papandreau's Pasok party, says that Greece "must say it is not holding the referendum" - as compared to his leader who just spent part of his speech defending the idea.
He also said that the bailout must be passed by at least 180 of the country's 300 MPs. That means Papandreau needs the support of the opposition to pass the plan.
03/11/2011 16:29 GMT
Papandreou: We Will Work With Opposition
Papandreou is still addressing his MPs:
"If the opposition is willing to negotiate then we are ready to ratify this deal and implement it."
He says that this deal represents "new political position for all of us". The opposition will form part of the negotiating party, but it is not clear whether he means it will be a full coalition.
He appeals to his party to vote in tomorrow's confidence vote.
Papandreou claims the confusion/discussion (delete as appropriate) around the referendum has been a "beneficial shock".
03/11/2011 16:20 GMT
Papandreou: I Believe In Democracy
Papandreou: "I trust the wisdom and maturity of the Greek people and I trust it more than what is now called the political establishment.
"I believe deeply in democracy, and this is my principle and is well-rooted in our political party. In our political and cultural traditions. ... We believe in their opinion in one of the most important issues in recent days and of course our European partners recognise our right to go to a referendum ... Our partners would ideally not like to deal with national elections or a referendum."
Papandreou said that being part of the euro is 'taken for granted' in Greece.
Papandreou seems to be arguing that since turning down the bailout would be equivalent to leaving the Euro for at least ten years - he says was told this by the eurozone leaders - a referendum does not make sense.
"The question was not to have a referendum or not, it was how we safeguard the best possible implementation of the decisions that were made on 26 and 27 October."
"It was the failure of our society to implement this decision. ... It is revealing what has been talked about inside and outside Greece in the past couple of days. ... Our government is not afraid of asking the Greek people."
"But what alternatives did we have? The first one, which I think would be a catastrophe would be to go to a national election. ... I doubt we would get to the end of this election without a bankruptcy. The other alternative was to carry on with what we had started and get a consensus and prove to Europe that we could implement these decisions, and the third alternative would be to achieve a consensus for the decisions of the 26 and 27 October both before and after the elections, is something I have tried to achieve."
03/11/2011 16:05 GMT
Papandreou Addresses Greek Parliament
Papandreou has just told the Greek parliament that the October bailout deal was a 'landmark' for the country.
He said the deal had opened 'a new window to the future' and said the debt reduction would affect all of the people in Greece.
He has also talked about the prospect of a national unity government and said that the decision to hold a referendum or not was "our decision... a decision for the government".
"For the last two years we have waged a battle of Titanic proportions," he said.
"Our first duty being to fend off bankruptcy, to prevent the country collapsing."
The PM also said that the decisions made by the government have "saved the country" and added that its position inside the Euro was at stake.
"It's never happened before that a country has had 50% of its debt written off and is still complaining", the PM said.