Greece Gets Ultimatum: Accept Austerity Plan or Forego Extra Bailout Cash by David Gow / The Guardian UK Athens / Common Dreams

Greece Gets Ultimatum: Accept Austerity Plan or Forego Extra Bailout Cash

by David Gow in Athens

Greece has been given an ultimatum that it will get no more money from the European Union and International Monetary Fund until its people have voted to accept the austerity measures demanded by the bailout package.
Protesters dressed as prisoners gather during an event to protest against austerity measures outside the Greek parliament in Athens, Tuesday, Nov. 1, 2011. (AP Photo/Thanassis Stavrakis) The latest tranche of bailout aid, worth €8bn (£7bn) and agreed just two weeks ago, is seen as vital for ensuring that Greek public sector workers can continue to be paid. But it will now be delayed until after the country decides in a referendum whether it accepts the new rescue package or even wants to stay in the euro.
The threat to send Greece closer to bankruptcy emerged on the margins of the G20 summit in Cannes – due to start on Thursday – and follows a blunt warning from Jean-Claude Juncker, chairman of the eurogroup, that the sixth tranche of the original €110bn bailout was now in jeopardy.
Speaking after the bombshell decision of Greek prime minister, George Papandreou, to hold a referendum, Juncker, Luxembourg's veteran prime minister, asked: "Can we under these conditions pay out the sixth tranche, the €8bn, that we decided upon two weeks ago when we don't know whether the Greeks still agree with what was agreed?"
The €8bn was due to be paid in mid-November but German officials are suggesting that Greece – which has €360bn debts and GDP of just €220bn – can survive until mid-December without the payment. The likely dates for the referendum are thought to be 5 or 12 December.
The IMF board had yet to endorse the payout of the sixth tranche, but it is now thought that meetings of both the 17-strong eurogroup of finance ministers and the broader EU group including non-eurozone ministers could formally decide to withhold payment early next week in Brussels.
However, there remains doubt whether the referendum will ever be held, given the fragile hold on power that Papandreou has before Friday's confidence vote on his government. There is also confusion about what exactly the Greek public will be asked. Some suggest the vote will only be on the bailout package, while others claim it will be on membership of the EU.
Stockmarkets have regained some composure after Tuesday's sell-off, but EU officials are angry that Papandreou's action has guaranteed weeks, if not months, of political uncertainty and market volatility. France's prime minister, François Fillon, told his parliament: "Europe cannot be kept waiting for weeks for the outcome of the referendum. The Greeks must say quickly and without ambiguity whether they choose to keep their place in the eurozone or not".

© Guardian News and Media Limited 2011

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G20 Summit Fails to Allay World Recession Fears / The Guardian/UK / Common Dreams

Published on Friday, November 4, 2011 by The Guardian/UK

G20 Summit Fails to Allay World Recession Fears

Summit ends in disarray as world leaders fail to agree increase to IMF and concerns mount over prospects for Italian economy

by Patrick Wintour and Larry Elliott in Cannes

The G20 summit in Cannes has ended in ominous disarray, drawing nearer the threat of a world recession.
The Italian prime minister, Silvio Berlusconi, right, at a G20 news conference with his finance minister, Giulio Tremonti. (Photo: Dylan Martinez/Reuters) Leaders were unable to agree upon a boost to the International Monetary Fund (IMF) to help distressed countries, while debt-ridden Italy, now seen as the epicentre of the euro crisis, was forced to put its austerity programme under the fund's control.
UK hopes that the Germans would relent and allow the European Central Bank to become the lender of last resort for the euro were also dashed.
In a day of unremitting gloom, and yet more market turbulence, the Greek government also stood on the precipice of collapse, risking an uncontrolled default, as the government of George Papandreou faced a late-night confidence vote in parliament. Prime Minister Papandreou was forced to cancel plans for a referendum on the euro.
The sense of stasis led the British prime minister, David Cameron, to issue a stark warning about the impact of the crisis on the world economy: "Every day that the eurozone crisis continues and every day it is not resolved is a day that it has a chilling effect on the rest of the world economy, including the British economy. I am not going to pretend all the problems in the eurozone have been fixed. They have not. The task for the eurozone is the same as going into this summit. The world can't wait for the eurozone to through endless questions and changes about this.
"We like the rest of the world need the eurozone to sort out its problems. We need more to happen in terms of detail on the European firewall." He also hinted at worse to come, describing this as only "a stage of the global crisis".
There had been hopes that the G20 would agree to increase IMF resources by as much as $250bn (£156bn) to more than $1tn, but disagreements about the wisdom, structure and size of the boost to the fund and over who would contribute meant the decision was left to a meeting of G20 finance ministers next February. The French president, Nicolas Sarkozy, had been eager to flourish a figure both to assure the markets and to top off his chairmanship of the G20.
Cameron revealed the friction, saying: "The very worst thing would have been to try and cook up a number without being very specific about who is contributing what. If you cannot do that, it is better to say the world stands ready to increase resources to the IMF as necessary."
Barack Obama, under pressure from his own Congress, was deeply reluctant to contribute to an expansion of IMF funds without clearer signs that the eurozone was sorting out its problems. Admitting he had been given "a crash course in European politics", the US president urged Greek and Italian parliaments to take decisive action to control their deficits, and so combat what he described as some of the psychological origins of the crisis. He also urged the euro area to start putting some resources into its European Financial Stability Fund (EFSF), a rescue fund agreed at the European summit on 27 October.
But the German chancellor, Angela Merkel, said: "There are hardly any countries here which said they were ready to go along with the EFSF."
The Italian prime minister, Silvio Berlusconi, was summoned to a late-night hotel meeting with Merkel, Sarkozy, the IMF director general Christine Lagarde and Obama, where he was instructed to bring Italy under quarterly IMF surveillance to ensure he implements tough austerity measures, including changes to the labour market, pension reform and the sell-off of state assets.
Italy has debts of €1.9tn (£1.6tn), or 120% of GDP, and if it followed Greece down the path towards a financial bailout, or default, the impact on the European banking system would be huge. Italian debt yields rose again on Friday to near unsustainable levels as traders reflected fears of a default by demanding higher returns. Italy faces new tests in further auctions of its debt this month – it has to raise €30.5bn in November, and a further 22.5bn in December.
Sarkozy denied the demands on Berlusconi represented something approaching an IMF coup, saying: "We never wanted to change governments, either in Greece or in Italy. That is not our role; that is not our idea of democracy, but it's clear that there are rules in Europe and if you exonerate yourself from these rules you exclude yourself from Europe."
Berlusconi, facing defections from his own party, insisted he had invited the IMF to offer advice. He said on Friday he had rejected an offer of IMF funds. "I don't think Italy needs that," he said, claiming his country was more solid than France or the UK. "Italian restaurants and vacation spots are always full. Nobody has the sense the country is in a crisis."
British officials privately admit that fear of an economic collapse in Italy is the single biggest concern gripping world leaders. They said: "We cannot have the Italians meeting in crisis every three days. We need some action."
The UK government will now focus on urging its European partners to make progress, and will continue to support extra cash for the IMF. Cameron said he would not need UK parliamentary approval to do this since the Commons had already voted to sanction an increase that would cover the proposed UK additional contribution.
In a sign that the collapse of Italy could lead to a collapse of the single currency, the chancellor, George Osborne, said the Treasury was undertaking scenario planning on such a development.
The EFSF has €440bn available to lend, of which roughly half is expected to be consumed by bailouts of Ireland, Portugal and Greece. The European Central Bank has purchased Italian debt since August, but will not do so indefinitely. Financing could leverage the EFSF's money into something larger, which has led the EU to pursue countries outside the eurozone with surplus cash, such as China.

© Guardian News and Media Limited 2011

Video: Euro-Chaos and Global Capitalism / The Real News Network / Common Dreams

Published on Friday, November 4, 2011 by The Real News Network

Euro-Chaos and Global Capitalism

Leo Panitch: We are witnessing the irrationality of capitalism and the incredible struggle of people in the street

© 2011 The Real News Network

Thirty Of America's Most Profitable Companies Paid 'Less Than Zero' In Income Taxes In Last 3 Years: By Jillian Berman / ICH

Thirty Of America's Most Profitable Companies Paid 'Less Than Zero' In Income Taxes In Last 3 Years:

By Jillian Berman
November 03, 2011 "Huffington Post" -- Many major corporations have managed to pay taxes at just over half of the corporate income tax rate, according to a new report.
Nearly 300 of the nation's most profitable companies paid an average tax rate of 18.5 percent from 2008 to 2010, less than half of the 35 percent corporate tax rate, according to a study by the Citizens for Tax Justice released Thursday. Of the 280 companies, 78 studied paid a tax rate of zero or less during at least one year of the three year period.
And thirty companies, the report says, had a negative income tax rate from 2008 to 2010, even though they took home a combined $160 billion in pre-tax profits.
The financial services industry netted the largest share -- at 16.8 percent -- of the $222.7 billion in total tax subsidies that the companies received, the study found. Wells Fargo took home the most tax subsidies of them all, raking in nearly $18 billion in tax breaks over the last three years.
Officials at some major corporations lashed out at the study's findings following its release. In a statement, GE called the report "inaccurate and and distorted," according to the Washington Post. Verizon spokesman Robert Varettoni, told WaPo that "findings in this and other recent reports have been more politically motivated than truthful."
Even without lowering the corporate tax rate, large companies are still able to take advantage of a variety of loopholes available to them to avoid paying taxes. One, called the "active financing exception" allows corporations to sidestep paying taxes on overseas profits if the company derived those profits by "actively financing" a deal, according to the NYT.
Corporations also commonly take advantage of a rule called "accelerated depreciation," which allows them to write off investments faster than they wear out, according to WaPo. The companies then subtract the falling value of the investments from their taxable income.
The findings come as politicians wrangle over the best way to cut the nation's budget deficit. Republicans recently proposed lowering the corporate tax rate to 25 percent and paying for it by eliminating business tax breaks. A study by the Joint Committee on Taxation, requested by congressional Democrats, found that eliminating the business tax breaks alone wouldn't bring in enough revenue to make up for the lowered rate.
Republican presidential candidate Rick Perry said last month that if elected president he would cut the corporate tax rate to 20 percent. Perry told The New York Times that he didn't care that his tax plan could possibly increase income inequality. Another Republican presidential candidate, Herman Cain, vowed to slash the corporate tax rate as part of his 9-9-9 plan, which if enacted would cap sales tax, corporate income tax and personal income tax at 9 percent each.
Companies such as Apple and Google are lobbying Congress to pass an additional tax loophole known as a repatriation tax holiday that would allow corporations to avoid taxes on more than $1 trillion in offshore profits, Bloomberg reports. In exchange, the companies argue, companies would invest those dollars in the U.S.
U.S. corporations with foreign profits that amounted to 10 percent or more of their worldwide profits paid tax rates to foreign countries that were nearly one-third higher than the tax rates they paid to the U.S., the tax justice study found.
The Heritage Foundation, a conservative think tank, reversed its position on the repatriation tax holiday last month, saying that it wouldn't help to spur U.S. job growth or investment. The Treasury Department found that a similar tax holiday passed in 2004, did little to boost employment growth.
In fact, several companies that benefited from the 2004 law cut jobs in its wake. Dow Chemical, Verizon and Bank of America are just some of the 10 companies that slashed jobs after benefiting from a repatriation tax holiday, according to the Institute for Policy Studies. 

Greek Drama Not Over Yet: What May Happen Next / By: Reuters / ICH

Greek Drama Not Over Yet: What May Happen Next

Published: Friday, 4 Nov 2011 | 1:22 PM ET

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By: Reuters

Whatever the outcome of Greece's confidence vote on Friday, political instability will almost certainly keep markets guessing whether Athens will be able to ratify a 130 billion euro bailout deal in time to avoid a messy default in December.

Milos Bicanski | Getty Images Demonstrators shout slogans during a protest against plans for  new austerity measures on October 19, 2011 in Athens, Greece.

Greece has to pay nearly 3 billion euros in bonds maturing in December with big bills falling due from Dec. 19 onwards.

Finance Minister Evengelos Venizelos told parliament on Thursday the state can meet its obligations until December 15.

Greece must pay 1.172 billion euros on a 3-year bond due Dec.19, 978 million euros on a zero-coupon bond due Dec. 22 and 714 million euros for one-year paper maturing Dec. 30.

Prime Minister George Papandreou is likely to step down whether he wins or loses Friday's vote after his call for a referendum on the country's bailout lifeline triggered a revolt within his party and prompted anger from European leaders. The referendum plan has since been called off.

Here are some scenarios on how the drama in Athens might play out in the coming weeks:

Papandreou Wins, Sets Coalition Talks

The most likely scenario is that of Papandreou's party — angered by his shortlived plan to put the bailout to a referendum — backing him in the confidence vote on the understanding he makes a face-saving exit later.

Government sources have said Papandreou had struck a deal at a cabinet meeting on Thursday under which he would stand down after he had negotiated a coalition agreement with the conservative opposition, provided he survives Friday's vote.

Some of his own supporters have hinted at this, saying they will back him at Friday's vote as long as he begins  talks with the opposition on a cross-party coalition government that can ratify the euro zone rescue plan and then resigns.

Several lawmakers in the ruling Pasok party have already said they are in favor of such a "national unity" government and Papandreou himself has said he is willing to begin talks with the New Democracy opposition party on the issue.

Former European Central Bank Vice President Lucas Papedemos has been cited as a potential candidate to lead such an interim government of technocrats.

One potential sticking point between the two sides is on how long a coalition government will be in charge.

New Democracy leader Antonis Samaras wants a transitional government that ratifies the bailout and proceeds immediately to elections — in as little as six weeks — while a Pasok party official has suggested holding elections in March.

If those talks fail, the ensuing chaos would mean the country heads to snap elections sooner or later.

Papandreou Loses, Snap Elections Called

If Papandreou loses Friday's vote and an attempt to patch together an interim government fails, parliament would be dissolved and Greece would be forced to head to early elections — a potential doomsday scenario that puts the country at risk of not getting its bailout money in time.

Aris Messinis | AFP | Getty Images

Elections can be held in as little as 30 days, but polls show a vote held right now may not deliver an outright winner.

The New Democracy conservatives, who have widened their lead over the Pasok Socialists in recent months, are expected to win the largest share of votes but are unlikely to bag the 151 seats in parliament needed to form a new government.

The party may try to strike an alliance with the far-right Laos party or even Pasok to form a government, prolonging uncertainty in the markets about Greece's future. But if it gets close enough to a majority, it may hold out and demand a repeat vote that would allow it to rule alone.

Austerity-hit voters would then head again to the polls amid a vitriolic political climate where politicians warn of dire consequences if the vote fails to produce an outright winner.

The big question would be whether increasingly exasperated foreign lenders will approve an 8 billion euros aid  payment that was due this month in the hope a new parliament will immediately ratify the bailout package struck last week.

Papandreou Loses, Parliament Maintained To Ratify Deal

If he loses the late-night Friday vote, Papandreou would be forced to step down immediately but this would not automatically mean the parliament is dissolved and elections are held.

Given debt-choked Greece risks running out of cash in just over a month, party leaders could try to forge a deal to set up a transitional government with the aim of getting the EU bailout ratified by parliament before any elections are held.

Such a move would be unprecedented in Greek politics, but could be a last-ditch option the parties explore in a bid to avoid a messy bankruptcy and potential exit from the euro zone.

In such a scenario, the president would be obliged to give each political party three days to find allies to form a new government, meaning the process could last up to two weeks.

If this fails, then parliament is dissolved and elections are held within 30 days under a caretaker government appointed by the president.

Jon Corzine's rise and fall is a reminder of the risk Democrats take when they're too cozy with the financial elite By Steve Kornacki / Salon

Friday, Nov 4, 2011 11:06 AM 20:04:32 PDT

The painful demise of a Wall Street Democrat

Jon Corzine's rise and fall is a reminder of the risk Democrats take when they're too cozy with the financial elite

By Steve Kornacki

Jon Corzine celebrates his victory in the Democratic primary for the U.S. Senate in 2000. (Credit: AP)

Topics:War Room

Jon Corzine, who resigned today from MF Global, the bankrupt brokerage house he took charge of after leaving New Jersey’s governorship, did have a day like this once before on Wall Street. It came on January 11, 1999, when a Goldman Sachs executive named Henry Paulson won a bitter power struggle by convincing the firm’s executive board to oust Corzine as its chairman and co-chief executive.
Finance was the only life that Corzine, who had started out as a bond trader and clawed his way to the top of the world’s largest investment bank, had known. But that didn’t keep him from eyeing another grand arena for his next act: That Wall Street resume — and the bulging personal net worth it had produced – was precisely what the Democratic Party of the late-1990s was looking for.

Under Bill Clinton, Democrats had forged what seemed to be a winning political alliance with Wall Street, pursuing fiscal policies that largely pleased the financial industry while reaping a campaign cash windfall. Much of the credit for the boom economy of the Clinton years was given to Robert Rubin, who was lured away from Goldman Sachs to run the Treasury department in 1994. Rubin had been Corzine’s mentor at Goldman and had also introduced him to the elites of the Democratic Party, with Corzine donating around $1 million during his Goldman years to candidates and party committees at the federal level.
Thus, the timing of his Goldman humiliation was actually fortuitous, because just as he was being shown the door, one of New Jersey’s two senators, Frank R. Lautenberg, was getting ready to call it quits. Corzine lived in the tony suburb of Summit, but he was a stranger to the Garden State’s quirky and parochial political culture; all of his activity had been at the national level. But there was a link: The state’s other senator, Robert Torricelli, was chairing the Democratic Senatorial Campaign Committee for the 2000 cycle – and he’d been cultivating Corzine for years.
For Torricelli, Corzine met two needs. With his enormous personal fortune, he’d be able to fund his own campaign, freeing the DSCC from having to expend its precious resources on the pricey New York and Philadelphia airwaves. (Several other personally wealthy Democrats, like Maria Cantwell and Mark Dayton, also ran for the Senate in 2000.)
But there was also a Jersey angle: James J. Florio, who had served as governor from 1989 to 1993, had announced that he’d seek a comeback, and with his name recognition, he’d be the clear favorite in the Democratic primary for Lautenberg’s seat. And Florio, who had represented South Jersey in the House for eight terms before winning the governorship, gave party leaders – particularly in the northern part of the state – the jitters.
As governor, he’d enacted a $2.8 billion tax increase that set off a tax revolt and devastated the state’s Democratic Party in the early 1990s. At one point, Florio’s approval rating had dipped to 15 percent, although he did stage a remarkable recovery and came within a fraction of a point of fending off Christine Todd Whitman and winning a second term in ’93. Still, Democratic leaders feared that memories of the tax hike would cost him – and them – dearly if Florio ran as their Senate candidate in 2000.
The joke is that Corzine’s 2000 campaign was the single best employment program in the state. Anyone in Democratic politics who wanted a job could get one. Any Democratic organization willing to sign on could look forward to a hefty check of its own. Officially, Corzine spent $35 million on the primary alone – and there are Democrats who still swear the real number was much, much higher. By all accounts, Florio wiped the floor with Corzine every time they debated, something that probably impressed the four- or five-dozen people who were watching. Meanwhile, the hundreds of thousands of New Jerseyeans who watched network television were treated to a parade of slick Corzine ads. The primary was a rout: Corzine won by 16 points.
There was a moment in the fall when things got scary for Corzine. Pitted against Rep. Robert Franks, a moderate congressman with a good government message who also claimed Summit as his hometown, Corzine’s free-spending became an issue. Franks framed the election as a referendum on Corzine’s attempt to buy it. At the presidential level, Al Gore was crushing George W. Bush in the state, but the Senate race got tighter and tighter as the campaign progressed. The New York Times even weighed in with a surprise endorsement of Franks, arguing that “if political philosophy were the only consideration, we would be for Mr. Corzine. But the more responsible way that Mr. Franks has conducted his campaign, in combination with an acceptably moderate record, has earned our endorsement.”
In the race’s final weekend, Franks caught Corzine in the polls, but the top-of-the-ticket drag from Bush proved too much on Election Day, and Corzine prevailed by three points. Franks had won the campaign, just not the election.
In the Senate, Corzine’s Wall Street ties quickly proved an asset. Just two years into his term, Democratic leader Tom Daschle picked him to run the DSCC. The party had just lost its narrow majority in the 2002 midterms and hopes were high that Corzine, with his access to so many elite donors, might lead a comeback in 2004. But it was a tough assignment, with the retirements of five Southern Democrats making Democratic gains all but impossible. Corzine won generally positive reviews for his stewardship of the committee, even if Republicans ended up picking up four new seats.
But by the time Election Day rolled around, Corzine was already over Washington. He was anxious to climb the ladder in politics, and spending years as a junior member of the Senate wasn’t going to get him where he wanted to go. The New Jersey governorship, though, was a different matter. The only problem: The office already belonged to a Democrat, Jim McGreevey. But McGreevey had serious problems, with missteps, ethics scandals and even a federal investigation dropping his poll numbers and stirring talk that Democrats might want to dump him in 2005 – if only they could find a consensus alternative. Quietly in 2003 and early 2004, Corzine’s camp let it be known that he’d be willing to play the white knight role, if it came to it.
It ended up being easy. Seemingly out of nowhere, McGreevey announced in August 2004 that he was being blackmailed by his former gay lover – a man he’d appointed to run the state’s homeland security agency despite his utter lack of qualifications – and resigned. Corzine tried to push McGreevey into giving up his job on the spot, so that a special election could be held in November ’04. The state’s Democratic bosses, all of whom had long since learned that playing along with Corzine flush perpetually flush coffers for their own organizations, were with him.
McGreevey, tired of being pushed around by the same bosses, resisted and declared that he’d stay for three more months – meaning there’d be no special election. Instead, there’d be an acting governor, Richard J. Codey, the wry, self-deprecating president of the state Senate. Codey was a hit with the public, but the bosses reviled him and it took too long for his popularity to build. He wanted to run for a full term in the 2005 election, but in January of that year, Corzine called in all of his favors and lined up all of the state’s major county Democratic organizations. (In one notorious episode, he even used his 89-year-old mother, who lived in Illinois, to donate $37,000 to the Bergen County Democratic Organization.)
Codey backed down, the primary became a lay-up for Corzine, and the general election wasn’t much tougher. The roughest moment came when Corzine’s ex-wife, whom he’d left after entering politics, bitterly told the New York Times that he “let his family down, and he’ll probably let New Jersey down, too.” Her words were used in a desperate last-minute ad from Corzine’s Republican opponent, Douglas Forrester. But it had no apparent effect, and Corzine was elected by a ten-point margin.
It was hard to spend much time around Corzine enthusiasts in those days without someone pointing out that the road to the White House runs through America’s State Houses. Corzine, it was said, would demonstrate the value of his Wall Street background in tackling the Garden State’s enormous fiscal problems, setting him up for a storybook redemption: The man who’d been dumped by Goldman Sachs would seek the presidency – and win it.
But it was pretty much all downhill from there, thanks in no small part to Corzine’s old friends in high finance. Here you can actually draw a direct line between the making an unmaking of Corzine’s political career. It was, after all, his Goldman background and his ties to Rubin that made him so attractive to Democrats in the first place. And it was in the same year that Corzine launched his Senate campaign that Rubin helped push through the repeal of the Glass-Steagall Act, which ended the separation between commercial and investment banking – and laid the groundwork for many of the excesses that led to Wall Street’s meltdown in 2008. And it was the miserable, rotten economy produced by that meltdown that helped doom Corzine’s reelection campaign in 2009.
It takes an awful lot for a Democrat to lose in New Jersey, which last sent a Republican to the Senate in 1972 and which last supported the GOP’s presidential nominee in 1988. In fact, prior to 2009, Republicans had in the previous 36 years won just one statewide election by more than a point. But Corzine fell to Chris Christie by nearly four points, a landslide by Garden State standards. And while the economy wasn’t the only reason – Corzine’s popularity had been mediocre for much of his term, during which he’d faced his share of humbling setbacks – it’s still hard to imagine him losing in ’09 if popular anxiety hadn’t been so high.
And now Corzine’s latest quest for redemption has come to a painful end as well, with reports of missing money and a possible federal investigation. He’s 64 years old now, and there may actually be another opening on the horizon in New Jersey politics: Lautenberg, who returned from his brief retirement in 2002, could retire from the Senate in 2014, when he’ll be 90. But if he does, here’s guessing Democrats will look to someone besides Jon Corzine this time.

Close

Steve Kornacki is Salon's news editor. Reach him by email at SKornacki@salon.com and follow him on Twitter @SteveKornacki More Steve Kornacki

Greek Government on Brink of Collapse Over Debt Crisis / The Guardian/U/ Common DreamsK

Published on Thursday, November 3, 2011 by The Guardian/UK

Greek Government on Brink of Collapse Over Debt Crisis

by David Gow and Helena Smith in Athens

The Greek government stands on the point of collapse, with the country set for a general election over membership of the euro rather than the referendum planned for early December.
A spokesman for Greece's government says it is prepared to discuss an opposition demand for the creation of a transitional government to approve the latest European bailout deal and secure the next installment of rescue loans for the country. (AP Photo/Thanassis Stavrakis) Calls for a national unity government embracing the opposition also intensified as EU political leaders and financial markets demanded an end to the regional uncertainty unleashed by a small country on the periphery of the eurozone and called for measures to prevent a slide into Europe-wide slump.
George Papandreou called an emergency meeting of his cabinet for noon local time (10am GMT) on Thursday after his finance minister broke ranks over the referendum and several socialist deputies quit or threatened to quit his Pasok bloc in parliament.
Papandreou's political survival both as prime minister and head of the Pasok party will be determined by the cabinet meeting. Filing into parliament for the session MPs said they would listen to the leader's assessment of the Cannes meeting before they "made up their minds" as to whether to back the confidence motion.
"The PM has realised that his referendum call has backfired disastrously," one Pasok cadre told the Guardian. "He knows the vote cannot be held and that the overriding question now is when the country holds elections."
At all costs, said aides, Papandreou was keen to avoid a bout of "unnecessary blood-letting" that would further increase the political and economic uncertainty engulfing Greece.
"What we need is calm … not a massacre which has happened before," said Apostalos Kaklamanis, who helped found Pasok out of an anti-resistance movement with Papandreou's father, Andreas, following the collapse in 1974 of military rule.
Another veteran socialist, Telemachos Hytiris, said Papandreou should now assemble a government of national unity with the purpose of ratifying last week's EU/IMF bailout for the country and then call early elections.
"The prime minister should call the other parties to join a coalition government and share the responsibility, to allow the European deal to pass and the next loan tranche to be disbursed," he told reporters. "After that we should smoothly go to elections."
Papandreou faces defeat in parliament on Friday on a confidence vote after his majority sank to just one as deputies loyal to Evangelos Venizelos, the finance minister and would-be premier, abandoned the socialist prime minister.
The political chaos threatens to bring wider contagion in eurozone financial markets, with Italy in the firing line as yields (interest rates) on government bonds reach historic highs and Silvio Berlusconi loses his grip on the reins of power.
EU leaders publicly and privately are putting enormous pressure on Antonis Samaras, leader of Greece's opposition New Democracy party, to drop his populist anti-austerity stance and join a government of national unity.
This was the message from the French president, Nicolas Sarkozy, and the German chancellor, Angela Merkel, at their stormy talks with Papandreou and Venizelos at the G20 summit in Cannes overnight. Christine Lagarde, the IMF managing director, has directed similar messages at Greek leaders in recent days.
Venizelos took the unprecedented step of issuing an official statement at 4.45am local time on Thursday in Athens after stepping off the plane from Cannes. It said: "Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt. This acquis by the Greek people cannot depend on a referendum."
Venizelos added that the sixth tranche of the original €110bn bailout, worth €8bn and destined to pay government officials' salaries, must be paid "without any distractions or delay". Sarkozy and Merkel refused point blank to pay it because of the turmoil caused by Papandreou's referendum plans.
Papandreou insisted overnight that he had only decided upon a national referendum because of the failure to reach a "wider consensus" on the bailouts and accompanying austerity programmes. He also conceded he was not certain to win tomorrow night's confidence vote, or the plebiscite for that matter.
Amid the political turmoil Jean-Claude Juncker, the eurogroup chairman and veteran Luxembourg premier, raised for the first time the prospect of Greece's exit from the eurozone.
"We cannot permanently ride a rollercoaster on Greece; we have to know where things are going, and the Greeks have to tell us where they would like things to go," he told German ZDF television.
He added: "I am very decidedly of the opinion that everything must be done so that one euro country does not leave the 17 but if that were the wish of the Greeks, and I would find that wrong, we cannot force the Greeks.
"If the Greeks make clear via a referendum that they would feel better outside the eurozone than inside the eurozone, then this is a Greek decision, then our Greek friends have to describe the way by which they want to get out of the eurozone."

© Guardian News and Media Limited 2011