Euro More Important Than Greece: Eurozone

Papandreou retracts call for referendum on bailout

As eurozone ministers pressured Greek Prime Minister George Papandreou to drop plans for an announced referendum on the country's latest negotiated rescue package, they made their priorities clear at a midnight news conference following a grueling crisis meeting in Cannes.

German Chancellor Angela Merkel said the group's priority was to save its currency, not to rescue Greece. The pressure apparently had its desired effect; Papandreou later in the day announced he would ditch the referendum provided the opposition would support the bailout.

Reuters reported that ahead of the G20 meeting beginning Thursday, eurozone members had begun to discuss the possibility of a Greek exit from the 17-nation bloc. Luxembourg Prime Minister Jean-Claude Juncker, who is chairman of the group, said discussions were under way on how to manage such a move. He was quoted saying, "We are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the eurozone. We are absolutely prepared for the situation."

Jean Leonetti, France's Europe minister, was less diplomatic, saying the euro did not need the distressed nation to survive: "Greece is something we can get over, something we can live without." The eurozone drove its point home, telling Papandreou that Greece would receive no funding at all until the referendum was held, and none afterward if the vote did not approve the rescue package.

Under pressure, Papandreou at first conceded that he would move the referendum up to Dec. 4, although an unidentified official in his ruling party was reported by Bloomberg to say that perhaps no referendum would take place at all. Others within his party were backing away from him, and some said Papandreou was finished as prime minister. He may still be voted out despite canceling plans for a vote, as his support in Parliament has dwindled since the first mention of the referendum.

Reflecting market jitters over the volatile situation, the yield on two-year Greek bonds soared, at one point rising to 107.16, adding 10.58 percentage points to hit a record.

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