UK

Greece 'Scraps' Eurozone Bailout Referendum, Reports Say, As Pressure Mounts On Papandreou

03/11/2011 15:06 GMT | Updated 03/01/2012 10:12 GMT

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.