Cannes, France Greece’s prime minister flew to the chic French resort of Cannes on Wednesday to explain to his furious European colleagues why he was holding a surprise referendum on a bailout deal that took them all months to work out.
George Papandreou’s pledge to let the Greek people themselves vote has riled financial markets and threatens to derail an entire European debt crisis plan that’s not even a week old. Observers called it a “back me or sack me” move to make sure the Greek public will support the severe austerity measures looming ahead.
But a “no” vote in the referendum would have enormous consequences not just for Greece but for the rest of Europe. It could lead to a disorderly Greek default, force Greece out of the 17-nation eurozone, topple many fragile European banks and send the global economy spinning back into recession.
With this in mind, French President Nicolas Sarkozy, German Chancellor Angela Merkel and top European Union officials gathered at the Palais des Festivals, site of Cannes’ famous film festival, for private emergency talks ahead of a meeting with Papandreou.
The pressure on Papandreou was mounting. European leaders “will not accept” it if Greece jeopardizes the rescue plan, Luxembourg Prime Minister Jean-Claude Juncker said after the first round of talks.
“All 17 of us made decisions a week ago,” he said, urging Greece not to “dissociate itself” from those decisions. “The situation is serious.”
International Monetary Fund chief Christine Lagarde sought a positive stance, saying after the first round of talks Wednesday in Cannes, “Of course there are hiccups. But what is important is the resilience and determination of the euro partners ... to go over the bumps on the road. In the face of adverse circumstances, the partners stand united.”
Sarkozy’s office announced yet another round of discussions about Greece for Thursday morning, with Germany, Italy, Spain, the IMF and the European Union. The talks will notably not include Greece itself.
Playing hardball, eurozone officials said an 8 billion euro, or $11 billion, loan that Greece needs within weeks to avoid bankruptcy was conditional on Greece backing the latest rescue deal.
“If these (reforms) are now being put in question in December by the referendum, then we have a completely different situation,” a eurozone official said on condition of anonymity because of the sensitivity of the issue.