Amid reports that Greece’s defence minister has sacked his defence chiefs, premier Papandreou fights to hold his government together over a referendum pledge on the latest eurozone bailout.
Prime Minister George Papandreou has called an emergency cabinet meeting, after six members of his party called on him to resign, rejecting his call for a referendum on an EU bailout.
Latest reports suggest Greece’s defence minister, Panagiotis Beglitis, has gone ahead and sacked the country’s military chiefs of staff.
The Nobel Prize-winning economist Professor Christopher Pissarides, who is Greek Cypriot, told Channel 4 News: “It is worrying when you hear the news about army officers being replaced now and resignations in the cabinet, right in the middle of this economic crisis.”
In a letter to the prime minister, one of the MPs, Eva Kaili said it was time for snap elections and a national unity government.
He said: “What is needed at this stage is for you to take the initiative for a new unity government with someone who is commonly accepted as a prime minister, in order to safeguard this deal.”
One MP has defected from the ruling Pasok party, leaving Mr Papandreou with a majority of only two seats – 152 out of 300 – as he faces a vote of confidence on Friday. Explaining her decision, MP Milena Apostalaki said she would keep her seat and fight the referendum as an independent: “I have an obligation to resist this erroneous political choice that divides the nation,” she said.
Nicolas Sarkozy and Angela Merkel announced this afternoon that they will meet in Cannes on Wednesday to discuss the situation, along with representatives from EU institutions, the International Monetary Fund and the Greek government.
In a statement, Sarkozy’s office said: “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 27th) summit, which are today more important than ever.”
The meeting was called after European leaders were taken by surprise by Mr Papandreou’s decision to call a referendum on the bailout.
“According to sources within the Greek defence ministry, quoted by Greek daily Eleftherotypia, Defence Minister Beglitis is planning to replace the leadership of the military with ‘his own people'”, blogs Channel 4 News Political Editor Gary Gibbon.
“Unnamed officials described his actions as ‘politically mad’ and ‘militarily dangerous’.
“I now hear the defence minister of Greece has gone ahead and sacked the military chiefs of staff. You have to wonder what he thought they were up to.”
Read more: Greece challenges its military establishment
The unexpected announcement that the country could face a referendum on the debt write-off caused markets across Europe to plummet.
Leading European stock markets closed for the day with deep losses. The FTSE dropped 122 points, or 2.2 % and the German DAX closed down 5 %, losing 306 points to 5834. In Paris, the French CAC lost an even worse 5.38 %, or 174 points to 3068.
In New York, where Wall Street is still open, the Dow Jones fell 2.3% in early trading.
Michael Hewson, analyst at CMC Markets, said if Greece voted against the eurozone deal, the fall-out could result in “a complete meltdown of the European banking system and throw Europe into turmoil”.
Eurozone leaders agreed last week to hand Athens a second, 130bn euro bailout and a 50 per cent “haircut” on its huge debt. The price of the package is a programme of harsh state spending cuts that have unleashed a tide of anger among Greeks.
The dismal opening in Europe followed a weak session in Asia where fears over the viability of the three-pronged EU rescue deal and weak Chinese data troubled investors.
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