Greek govt heading for meltdown

(Agencies) – ATHENS: Greece’s government appeared headed for meltdown ahead of a confidence vote after Prime Minister George Papandreou called a referendum on the country’s EU debt deal.

The shock announcement sparked a call for early elections and a defection that left Mr Papandreou’s parliamentary majority on a knife edge, while shares plunged 6.92 per cent.

Adding to the chaos, Greece’s foreign minister cancelled meetings with three foreign ambassadors, while Finance Minister Evangelos Venizelos was hospitalised with an inflamed appendix.

Amid the political upheaval,Venizelos – a former party rival of Mr Papandreou – appeared to distance himself from the referendum bombshell on Tuesday when sources close to him said he was unaware of it.

The assertion was at odds with an impassioned speech  Venizelos gave in parliament on Monday in support of the move.
An emergency cabinet meeting was under way amid reports that even a ministerial walkout was possible as protests mounted against the government’s austerity policies.

The semi-state Athens News Agency said  Venizelos made a flurry of phone calls to European and International Monetary Fund officials to brief them on developments.

Papandreou, fighting to keep the country’s troubled economic rescue on track, will travel to Cannes, France, on Wednesday where G20 leaders are holding a summit on Thursday and Friday.

He will attend a working dinner with host Nicolas Sarkozy of France, German Chancellor Angela Merkel, European council chief Herman Van Rompuy, EU commission chief Jose Manuel Barroso, eurozone head policymaker Jean-Claude Juncker, new ECB chief Mario Draghi and IMF managing director Christine Lagarde.

In a phone call with Ms Merkel on Tuesday, Papandreou insisted that the referendum would “strengthen” Greece in the eurozone and globally, his office said.

His call for a referendum was meant as a bid to secure approval of his disputed economic policies without early elections.

But the gambit backfired when a former deputy minister defected, reducing the ruling party’s majority in the 300-seat parliament to 152 deputies.

Papandreou had faced increasing dissent within his own party over the tougher austerity policy monitored by the EU and the IMF that has sparked general strikes and widespread protests, many of them violent.

Although the EU deal agreed last Thursday after marathon talks in Brussels included an agreement to write off 100 billion euros of debt owed by Greece, the Athens government still has to implement a painful package of austerity measures to get its hands on bailout funds.