Greece will receive no bailout money until it decides whether it wants to stay in the eurozone or not, German Chancellor Angela Merkel and French President Nicolas Sarkozy told embattled Greek Prime Minister George Papandreou last night (2 November).
The message was delivered at a joint press conference held by Sarkozy and Merkel following talks held with Papandreou on the margins of the G20 meeting that the French President is hosting in Cannes on 3 and 4 November.
Sarkozy said he had convened the meeting, held together with the heads of the European institutions and of the International Monetary Fund (IMF), in order to "hear" Papandreou.
The Greek prime minister was in fact summoned to Cannes after his surprising announcement that his government had decided to hold a referendum on the hard-fought deal to save his country from bankruptcy at the last eurozone summit in October.
"We are ready to help Greece, because solidarity is at the very base of the European project, as is the principle of loyalty. But this implies that Greece, on its side, fulfills its obligations," Sarkozy said.
Message to the opposition
The French president hammered out that their message was addressed to Greek politicians.
"We told clearly the Greek authorities, and that includes the majority, but also the opposition in Greece which listens to us, that the Europeans, as well as the IMF, could not envisage the sixth installment of the aid to Greece until Greece has adopted the whole of the package agreed on 27 October, and until all uncertainty related to the result of the referendum have been lifted," Sarkozy said.
He said that in view of the seriousness of the situation, he was issuing together with Merkel "a solemn appeal so that a political consensus is rapidly found in Greece".
Regarding the referendum, he said that the eurozone could not afford to stay for a long time in a period of uncertainty.
A referendum now, not later
"If there should be a referendum, we think it should take place the soonest possible, and we have appreciated the statements of the Greek prime minister indicating a possible referendum around 4-5 December," Sarkozy said.
Only the Greek government can decide when a vote will be held, but Sarkozy insisted that the real issue was Greece's fate as a eurozone member.
"Does Greece want to stay in the eurozone or not? We wish so," Sarkozy said. "We wish so very strongly. And we will make all efforts to make this possible. But it's up to the Greek people to answer this question. And this is the question that they should answer to, if a referendum is organised."
Papandreou, who controls a slim majority of 152 MPs in the 300-seat Parliament, faces a vote of confidence tomorrow. The decision on a referendum is up to the Parliament.
Stability for the euro
Speaking alongside Sarkozy, Merkel stressed that the two leader's first mission was the stability of the euro. "We prefer to reach this objective with Greece rather than without Greece. But the mission to keep the euro as a stable currency is our first duty," she said.
The German chancellor added that Papandreou's decision to hold a referendum had "changed psychologically" the situation since the last EU summit.
She said Papandreou had accepted the approach that the sixth bailout installment be withheld until Greece accepts all decisions taken on 27 October, and until the referendum is decided.
Just as Sarkozy, Merkel said that a political consensus in Greece was expected from Berlin and Paris, adding that Papandreou had pledged to bring the message to the different political forces in his country.
EU stronger after 27 October
Asked if the eurozone was "armed" in case Greece would exit the currency union following a negative result at the referendum, Merkel said: "We are armed. The decisions taken on 27 October are the right ones. The announcement of the referendum has changed the situation; therefore these decisions need to be implemented faster, so that whatever the issue the referendum is, we would be able to find a good decision for the euro."
Sarkozy said that the decision taken was to give a "coordinated, firm and final" European response to implement the decisions, taken unanimously at the 27 October summit.
The French president explained that this implementation would be accelerated and the French and German finance ministers would meet in the eurogroup framework as early as today, together with Economic and Monetary Affairs Commissioner Olli Rehn, to put in place the eurozone's bailout fund of around €1 trillion agreed at the summit.
Challenged by a journalist to explain whether he felt comfortable playing the role of a eurozone directorate with Angela Merkel, Sarkozy said it was "not by pleasure" that he had been performing this task.
"We are accountable for the stability of the euro. The Franco-German axis has become stronger with the crisis," he said.
Speaking to the press following his meeting with Sarkozy and Merkel, Greek Prime Minister George Papandreou said he was optimistic about the referendum results.
"I want to say that we will have a yes," he said.
Asked about the confidence vote on his government to be held on Friday in the Greek Parliament, he said "This is our first battle".
Asked whether he believed he would win, he said, "I do hope so but, obviously, this is a democratic process."
Greek Finance Minister Evangelos Venizelos turned against Papandreou, taking position against the proposed referendum.
Venizelos issued a statement in the early hours of Thursday after attending the talks with Merkel and Sarkozy.
"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt. This achievement by the Greek people cannot depend on a referendum," he said, quoted by BBC.
Venizelos also said that the next 8 billion euro of EU bailout aid should be released immediately.
The referendum proposed by Papandreou will ask Greeks to vote on the EU's new bailout deal for the debt-laden country rather than staying in the euro zone, Greek government spokesman Angelos Tolkas said on Wednesday. Asked about calls for the referendum to be held on euro membership, Tolkas told Reuters: "No, this will not be the issue. It will be the bailout plan."
The euro zone is working on a possible exit of Greece from the euro zone, the Prime Minister of Luxembourg and Eurogroup head Jean-Claude Juncker said on Thursday, quoted by Reuters. Juncker, who attended the meeting with Papandreou hosted by Sarkozy, said it was essential that other members of the currency union would not be damaged in such an event.
"We are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the euro zone. We are absolutely prepared for the situation which I describe and which I want to be avoided," Juncker said.
Greek opposition leader from the centre-right New Demoracy (ND) party Antonis Samaras hinted that the referendum proposed by Papandreou might not take place, the Greek daily Kathimerini reported.
Journalists questioned Samaras about what ND’s stand would be if the referendum goes ahead. His response was: “Let’s see if it’s going to happen first.”
Sources said the conservatives believe the negative reaction within the eurozone and at the International Monetary Fund and the rifts in the ruling centre-left PASOK
parliamentary group mean that Papandreou is unlikely to garner a parliamentary majority for his plebiscite proposal.
Samaras told his deputies that elections, rather than a referendum, were needed.
George Kyrtsos, a political commentator and editor of the City Press newspaper, quoted by WSJ, says that Mr. Papandreou should survive the vote of confidence but said the bigger test will be in gathering support to approve the referendum.
Commission President José Manuel Barroso issued a statement upon his arrival in Cannes.
"I want to make a very urgent and heartfelt appeal for national and political unity in Greece.
In the European Union we have agreed on far reaching measures to support Greece. But for those measures to be implemented it is critically important to have stability in the country.
Without the agreement of Greece to the EU/IMF programme, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee," Barroso stated.
- 3-4 Nov.: G20 meeting in Cannes
- 4 Nov.: Greek Parliament holds confidence vote on Papandreou, result expected by midnight.