After calling for a referendum on the bailout package for his country arrived at just last week, Greek Prime Minister George Papandreou found fellow lawmakers calling for his resignation for putting the country in jeopardy of default.
Not just leaders of the eurozone, but markets were stunned by the refrendum call; Papandreou did not notify policymakers before the announcement. The decision sent the euro and bank stocks tumbling as investors and officials alike feared the vote could lead not just to a derailment of the bailout but an immediate default by Athens, tearing the common currency apart and perhaps having even broader repercussions.
The German DAX index tumbled by 5%, while the French CAC had slipped by 5.38%. In Britain, which is not a member of the eurozone, the FTSE 100 index was down by 3.44%. Markets in the U.S. slid sharply in afternoon trading, with the three main indexes down more than 2%.
Reuters reported that a member of Papandreou’s own party, Milena Apostolaki, quit over the action, narrowing an already scant majority in the ruling coalition, while six others called for him to step down to clear the way for “a politically legitimate” administration”; the opposition has called for snap elections. Irate French and German leaders summoned Papandreou to come to Cannes Wednesday for a crisis meeting, ahead of the G20 meeting scheduled to begin on Nov. 3.
Eurozone leaders had been taken by surprise when Papandreou announced the referendum; his own finance minister, Evangelos Venizelos, had not been told and was hospitalized Tuesday.
The office of French President Nicolas Sarkozy issued a statement that said in part, “France and Germany are determined to ensure, with their European partners, the full implementation in the quickest time frame, the decisions adopted at the summit, which are today more important than ever.”
While he did not say it was inevitable, Jean-Claude Juncker, who chairs meetings of eurozone finance ministers, refused to rule out a Greek default, saying in the report, “The Greek prime minister has taken this decision without talking it through with his European colleagues.”
Asked if a rejection of the bailout by the Greek electorate would mean a declaration of bankruptcy, he was quoted saying, “I cannot exclude that this would be the case, but it depends on how exactly the question is formulated and on what exactly the Greek people will vote on.”