ATHENS?? Lawmakers in Greece's ruling Socialist party revolted Tuesday over their prime minister's surprise decision to hold a vote on a European debt deal, threatening the very survival of his embattled government.
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Prime Minister George Papandreou's announcement on the public vote unleashed political and market turmoil around Europe and the world, and left observers wondering just how long his government could hold on.
One Socialist lawmaker defected Tuesday, another called for an early election, and a third backed calls for a cross-party government to be formed to safeguard the European deal. Separately, six senior Socialist party members also called for Papandreou's resignation, Greek media reported.
The public vote would allow the Socialists ? who have been vilified by an increasingly hostile public during months of strikes, sit-ins and violent protests over austerity measures ? to pass the responsibility for the country's fate onto the Greek people themselves.
But it was not even clear that the government could survive a confidence vote scheduled for Friday, let alone ask the Greek people how they felt about a bailout deal that took European leaders months of intense negotiations to work out.
Revolting lawmakers
Lawmaker Milena Apostolaki declared herself an independent deputy, whittling down the Socialists' majority to a mere two seats ? 152 total ? in the 300-member parliament.
"The crisis in the country has taken on uncontrollable dimensions and is threatening the cohesion of Greek society," Apostolaki said in her letter announcing her resignation from the party's parliamentary seat.
She described the plebiscite as "a deeply divisive procedure."
In a sign of deepening political turmoil, another prominent Socialist deputy, Vasso Papandreou, called on the country's president to convene the heads of all political parties to create a cross-party government in order to safeguard the European debt deal. As soon as that is done, she said, early elections should be held.
Wall Street dives on European debt worries"The country is in danger of immediate bankruptcy," Vasso Papandreou, who is not related to the prime minister, told reporters outside parliament.
Papandreou's unexpected decision late Monday led to markets plunging on fears that Europe's plan to save the euro will unravel. He has not set a specific question, or a date, for the referendum, although ministers said it is expected to be held early next year.
This would be the first referendum to be held in Greece since 1974, when Greeks were called on to decide whether they wanted to keep the monarchy after the fall of a seven-year dictatorship.
Greece has been surviving since May 2010 on a multibillion international bailout ? but a second bailout is needed. European leaders held marathon negotiations last week to arrive at a new debt deal, which aims to seek 50 percent losses for private holders of Greek bonds and provide the troubled euro zone member with ?100 billion ($140 billion) in additional rescue loans.
Papandreou's unexpected decision late Monday led to markets plunging on fears that Europe's plan to save the euro will unravel. He has not set a specific question, or a date, for the referendum, although ministers said it is expected to be held early next year.
Under a new law passed just last month, a referendum can be called on issues of great national importance. But many have questioned Papandreou's motivation to call one on this debt deal, when he did not ask for a vote for Greece's first international bailout last year or for a new austerity package this year.
Emergency meeting
French President Nicolas Sarkozy and German Chancellor Angela Merkel will hold an emergency meeting with Greece on Wednesday to push for a quick implementation of Athens' bailout deal, Sarkozy's office said on Tuesday.
Markets tumbled across Europe in response to the announcement by the Greek government to hold a referendum on the agreement which is expected to take place in a few weeks.
"France and Germany are determined to ensure, with their European partners, the full implementation in the quickest time frame, the decisions adopted at the (October 27) summit, which are today more important than ever," Sarkozy's office said in a statement following a telephone call between the two leaders on Tuesday to discuss Greek plans for a referendum on the package.
The meeting, which comes just before a Nov 3-4 gathering of G20 heads of states in Cannes, on the French Riviera, was hastily arranged for Wednesday afternoon after European leaders were taken by surprise by Greek Prime Minister George Papandreou's decision.
"France and Germany are convinced that this accord will enable Greece to restore lasting growth," the statement said. "In consultation with our European partners and the IMF, (we) would like a road map to be quickly agreed to ensure the implementation of this deal."
The statement made no mention of the Greek referendum.
Sarkozy is also due to meet his top ministers, including the prime minister, finance minister and foreign minister as well as the central bank governor, at 1700 local time (10 a.m. GMT) to discuss the latest developments and Paris' plan of action.
Investors scurry
European politicians complained Athens was trying to wriggle out of the 130 billion-euro rescue deal agreed at a summit only last week, concerned not so much about the fate of Greece as the possibly dire consequences for the entire currency union of the referendum.
Ireland, which itself took a bailout, attacked Papandreou's idea.
"The summit last week was to deal with the uncertainty in the euro zone ... and this grenade is thrown in just a few short days later,'' European affairs minister Lucinda Creighton said.
"Legitimately there is going to be a lot of annoyance about it,'' she told Reuters.
On the markets, players scurried for safer investments, hammering stocks and punishing the euro.
"The referendum is a bad idea with a bad timing. The post-summit rally is over,'' said Lionel Jardin, head of institutional sales at Assya Capital, in Paris.
The FTSEurofirst 300 index of top European shares was down 3.3 percent, due not only to the possibility of a disorderly Greek default but chaos surrounding the euro zone's attempts to stop the debt crisis spreading to more significant economies such as Italy.
Euro zone banks exposed to Greece and Europe's bigger, troubled economies, suffered particularly. Shares in Italy's UniCredit dived 12.6 percent and France's Credit Agricole was down almost 10 percent.
Andrew Lim, banking analyst at Espirito Santo in London, said that a Greek "no'' vote could trigger a "hard default'', forcing banks to take losses of about 75 percent on their Greek sovereign bonds and raising the threat of a systemic risk.
"If we get a hard default in Greece, it will exacerbate the situation with Italy and Spain. It just increases the problem of Italy going down the same route, and that's the real risk,'' Lim said.
Reuters and The Associated Press contributed to this report.
Source: http://www.msnbc.msn.com/id/45114513/ns/world_news-europe/
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