Greek government struggles after bailout bombshell

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  1. hvactec
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    11/01/2011

    (Reuters) - Greek Prime Minister George Papandreou faced calls from within his own party to step down on Tuesday after he threw the nation's euro zone membership into jeopardy by calling a referendum on a bailout package agreed only last week.

    A leading lawmaker from Papandreou's socialist party quit while two others said Greece needed a government of national unity followed by snap elections, which the opposition also demanded.

    The leaders of France and Germany scrambled to limit the damage to the wider euro zone, and European politicians expressed incredulity at an announcement that caught everyone by surprise -- including Papandreou's own finance minister.

    "It's difficult to see what the referendum is going to be about. Do we want to be saved or not? Is that the question?" asked Swedish Foreign Minister Carl Bildt.

    Business executives in Greece expressed despair at how the country was being run and markets speculated on whether Italy will be the next euro zone country to slide into a debt crisis.

    Jean-Claude Juncker, who chairs meetings of euro zone finance ministers, refused to rule out a Greek debt default.

    "The Greek prime minister has taken this decision without talking it through with his European colleagues," he said in Luxembourg.

    Asked whether a Greeks "no" vote would mean bankruptcy for Greece, Juncker responded: "I cannot exclude that this would be the case, but it depends on how exactly the question is formulated and on what exactly the Greeks people will vote on."

    DEFECTIONS

    Papandreou, whose PASOK party has already suffered several defections as it pushes waves of austerity measures through parliament while protesters rally in the streets, said he needed wider political backing for the budget cuts and structural reforms demanded by international lenders.

    But his problems deepened dramatically after his announcement on Monday. A cabinet meeting was due to held later on Tuesday.

    PASOK lawmaker Milena Apostolaki quit the parliamentary group on Tuesday, reducing Papandreou's strength to just 152 seats out of 300 deputies before a vote of confidence.

    "It's my duty to resist this wrong political choice which divides in an effort to replace the popular mandate and threatens the country's viability," Apostolaki wrote in a letter to the president of parliament.

    "These are crucial moments and citizens need to be represented by members of parliament they have elected. Therefore... I am becoming independent."

    Fellow PASOK lawmaker Vasso Papandreou demanded a new government to ensure Greece receives the 130 billion-euro rescue deal agreed at a euro zone summit only last week.

    read more Greek government struggles after bailout bombshell | Reuters
     

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