Athens unraveling

Greek Prime Minister George Papandreou expressed his willingness on Thursday to scrap plans for a national referendum that threatened to unravel the latest eurozone bailout package and topple his government.

"The referendum was never an end in itself," Papandreou told his cabinet according to statements released by his office. "We had a dilemma - either true assent or a referendum. I said yesterday, if the assent were there, we would not need a referendum."

Papandreou, who has resisted calls for his resignation, began to rethink the referendum after the conservative opposition New Democracy party said it would support the 100 billion euro ($137 billion) bailout. Earlier in the day, the leader of New Democracy - Antonis Samaras - joined calls by several of Papandreou's Socialists to form a national unity government and hold early parliamentary elections.

"I ask for the formation of a temporary transition government with the exclusive responsibility to immediately hold elections, and ratify the loan deal under the present parliament," Samaras said in a televised address.

Change of heart?

Greek Finance Minister Evangelos Venizelos appeared to have changed his mind on the referendum after talks with French and German leaders Nicolas Sarkozy and Angela Merkel in the French city of Cannes.

Venizelos said in a written statement that "Greece's place in the euro is a historic achievement" and that "this established right of the Greek people cannot be put under scrutiny in a referendum." Development Minister Michalis Chrisohoidis appeared to echo those calls, saying, "There can be no… return to the drachma and the past."

French President Nicolas Sarkozy and German Chancellor Angela Merkel, leaders of the EU's two biggest economies, have made it clear to Greece that the 100-billion-euro loan package cannot be renegotiated, and that a voter rejection of the bailout would be a de facto rejection of the euro currency.

"We want to help Greece, and we want them to stay in the eurozone," Merkel said. "But the unilateral decision by Greece hangs in the air, and the situation has changed… The eurozone must be kept stable. We would prefer to accomplish this with Greece, rather than without Greece."

Merkel was one of several European leaders who had long dismissed the option of Greece abandoning the euro, but who now appear to be open to the idea. Jean-Claude Juncker, prime minister of Luxembourg and chairman of the group of eurozone finance ministers, said "everything must be done" to maintain the eurozone's unity, but that he could not "force the Greeks" to stay in.

"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 public broadcaster ZDF. "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, and our Greek friends have to describe the way by which they want to get out of the eurozone."

Yes to euro, no to government

Papandreou's Socialist majority in parliament was on thin ice, after an open rebellion left the prime minister with a presumptive 151-seat majority in the 300-member parliament. Papandreou could still win the no-confidence vote on Friday, and an official in his government said he did not plan on resigning despite being open to talks with the opposition.

Author: Andrew Bowen, Spencer Kimball (AFP, AP, Reuters, dpa)
Editor: Nicole Goebel