Forex News – Greek PM wins cabinet support for referendum; now needs Merkel and Sarkozy

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Greek Prime Minister George Papandreou managed to win the backing of all of his Cabinet members to hold the referendum and put the Greek bailout deal to a popular vote. Papandreou discussed the issue in a cabinet meeting that held for seven hours.

Greece plans to hold the referendum as early as December, the Interior Minister Haris Kastanidis said on Greek state television.

After the show of unity at home, Papandreou will face the leaders of France and Germany, who summoned him for emergency talks in Cannes, before a G20 summit of major world economies, to push for quick implementation of the bailout deal.

Papandreou now has to win the support of his international partners today at the meeting with German Chancellor Angela Merkel and French President Nicolas Sarkozy as well as new European Central Bank President Mario Draghi.

“This announcement took the whole of Europe by surprise,” French President Nicolas Sarkozy said in a rare televised address on the steps of the Elysee palace in Paris. “The plan … is the only way to solve Greece’s debt problem.”

But Greek PM Papandreou said “The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro.”

“No one will be able to doubt Greece’s course within the euro,” he added.

Papandreou’s gamble guarantees weeks of uncertainty just when the 17-nation European currency area is desperate for a period of calm to implement the remedies agreed to overcome its sovereign debt crisis.