Athens:
Hours after Prime Minister George A Papandreou of Greece emerged from a meeting with Europe's leaders, pledging to hold a referendum on a new European debt deal, key ministers in his government rebelled against the idea on Thursday, deepening rifts within his government that could force its collapse.
The turmoil threatened to eclipse the summit of the G-20 nations, including the United States, in the French Riviera city of Cannes. The drama is now centred on Greece and Europe's debt crisis, just a week after European leaders reached agreement on a broad bailout that Mr Papandreou has now said he will put to a popular ballot.
Mr Papandreou is to face a no-confidence vote in Parliament on Friday. But news reports spoke of defections among lawmakers, threatening the Greek leader's razor-thin, two-vote majority in Parliament. If the government collapses or Mr. Papandreou loses the no-confidence vote, the idea of a referendum could fall with him as the nation heads for early elections.
With rumour and speculation sweeping Athens about Greece's future political course, just about every available scenario offered the prospect of further upheaval both among European leaders and on the world's financial markets, injecting more uncertainty into a volatile equation that is threatening to drag a heavily indebted Italy into a debt crisis that the European Union might be powerless to reverse. In the absence of clear indications of Mr. Papandreou's intentions, conflicting reports spread. A private Greek television broadcaster, Mega, said he planned to resign soon to pave the way for the formation of an emergency government after consultations with ministers and lawmakers. But government officials did not respond to requests for comment on the report. State television said the Greek leader had no intention of quitting and would address Parliament later on Thursday in advance of Friday's vote.
Greek media reported that a group of government and Opposition lawmakers had written to Parliament demanding an emergency government. "The future of the country is hanging by a thread," the letter was quoted as saying.
Greece's conservative Opposition leader, Antonis Samaras, called for the formation of a transitional government to lead the country to early general elections, and signaled that his party, New Democracy, would back a European Union debt deal for Greece. "The way things have developed, the new European Union deal is unavoidable and must be supported," Mr. Samaras said on Thursday.
He called on Mr Papandreou to withdraw his proposal for a referendum which he described as "an attempt to blackmail the Greek people."
Divisions within Mr. Papandreou's government flared into the open on Thursday when Finance Minister Evangelos Venizelos and his deputy broke ranks with the prime minister to oppose the idea of a referendum on the broad euro bailout, saying it could jeopardize Greek membership in the single currency euro zone.
Faced with the growing insurrection among his own ministers, who only a day earlier appeared to have rallied around the referendum plan, Mr Papandreou called an urgent cabinet meeting.
The disputes emerged soon after Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France held emergency talks with Mr Papandreou in Cannes on Wednesday night to express dismay at his surprise announcement on Monday that he planned a referendum.
The French and German leaders and others said that they regretted that Greece had reached this point but that it was best to clear up the uncertainty.
At a news conference in the French resort late Wednesday night, Mrs Merkel and Mr Sarkozy also said that the comprehensive package to protect the euro, agreed to last week in Brussels by all 17 nations that use the currency, had to be upheld. It was up to the Greek people, they said, to decide whether they want to commit to the agreement - which includes banks' taking a 50 percent loss on the face value of their Greek debt - and to continue to use the euro.
Mrs Merkel said the referendum "in essence is about nothing else but the question, does Greece want to stay in the euro zone, yes or no?"
The two leaders also said that no more aid would be given to Greece until after the referendum. This would include the next $11 billion installment of aid; Greek officials have said that without the additional funds, the country will run out of money by mid-December.
Mr Papandreou expressed confidence that the Greek people would back a referendum, possibly on December 4 or 5, though he did not specify what question would be posed. He added, however, that Greece would either stay in the euro zone, with all the obligations that this entailed, or leave. It remains unclear whether the Greek Parliament will approve a referendum.
But in a statement on his return to Athens from Cannes, Mr Venizelos, the finance minister, said: "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 also said it was important for Greece to receive the next installment of bailout funds, due within weeks, "without distractions or delay."
Deputy Finance Minister Pantelis Oikonomou said in a television interview that he was "against holding a referendum on the euro. This would be totally inopportune." He also objected to French and German demands for the proposed ballot to be specifically about Greek membership of the euro zone.
"We have received an ultimatum," Reuters quoted him as saying. "Foreigners interfere in what we will vote upon in the referendum." The mood of revolt within the ruling elite seemed to deepen when a lawmaker from the governing Socialist Party, Dimitris Lintzeris called on the prime minister to resign, telling reporters outside Parliament that Mr. Papandreou "belongs to the past," news reports said.
If Mr Papandreou were to lose the support of his Socialist Party and resign, early elections could be held in a matter of weeks. But polls indicated that if elections were held, the Socialists would lose and no party would win enough seats to form a parliamentary majority.
Another possibility is the formation of a unity government between the Socialists, with a new leader at the helm, and New Democracy in Opposition. In June, Mr Samaras turned down Mr Papandreou's request for a unity government, sparking a political crisis that nearly toppled the government.
There were indications on Thursday that European Union leaders were braced for a potential Greek exit from the euro, adding to the bloc's pressure on the authorities in Athens.
If Greece did leave, "We are considering the issue of how we can ensure that no harm comes to our people in Germany, in Luxembourg, elsewhere in the euro zone," Jean-Claude Juncker , the prime minister of Luxembourg who also heads the finance ministers group of 17 countries using the euro, told Germany's ZDF television Thursday.
"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," The Associated Press quoted Mr. Juncker as saying.
"I am very decidedly of the opinion that everything must be done so that one euro country does not leave the 17 - but if that were the wish of the Greeks, and I would find that wrong, we cannot force the Greeks," he added.
The crisis has drawn attention away from what Mr Sarkozy, the host, had hoped would be a triumphant summit after the agreement by European leaders a week ago on a broader bailout.
But Mr Papandreou's announcement late Monday of his plan to call a referendum has changed the imagery to one of discord, played out in the full glare of international attention from a host of global leaders, including President Obama, at what was supposed to be the crowning moment of the year-long French presidency of the G-20. Rather than offering a boost for Mr. Sarkozy's re-election prospects next year, the gathering has been turned into another session of crisis management.
After a meeting with Mr Sarkozy, President Obama urged the European Union to resolve the crisis over Greece and the euro as soon as possible.
"The United States will continue to be a partner with the Europeans to resolve these challenges," Mr Obama said, without specifying how. He and Mr Sarkozy also discussed Iran's nuclear threat and the need to keep up global pressure on Tehran to stop enrichment, as the United Nations has demanded. "We had the opportunity to talk about a range of security issues," Mr Obama said.
Europe has put pressure on Greece to hold the referendum as soon as possible, because a "no" vote might push Greece closer to a disorderly default.
It is also unclear exactly how Mr Papandreou would phrase the question to be put to the voters. He has said it will be on the deal reached last week to write down Greek debt in exchange for austerity measures.
Amid the general confusion, the strategy of Greece's center-right New Democracy Opposition appears to be to wait for the Socialists to implode. The Opposition leader, Mr Samaras called Mr Papandreou - his former roommate at Amherst College - "desperate, panic-ridden and dangerous" and said snap polls would bring "deliverance" to the debt-wracked country. "We do not want elections purely because of the indisputable discord between the people and the government but because danger is stalking this country," he added.
Mr Papandreou's political fate now lies with his fellow members of the Socialist Party, which is divided between reform-minded politicians who think he has failed to deliver promised changes; his die-hard supporters; and traditionalists loath to dismantle the welfare state they helped build.
On October 16, three government ministers issued a statement calling on Mr Papandreou to carry out the changes - cutting government jobs, privatizing government businesses and cutting pensions - more quickly. Their move was widely seen as an effort to position themselves as reformers in a post-Papandreou future - or perhaps the start of a potential breakaway party in a new political constellation.
On Tuesday, one Socialist legislator, Milena Apostolaki, defected, calling Mr Papandreou's move to hold a referendum "an erroneous political decision that not only divides the nation but also puts at risk all the efforts and painful sacrifices already made by the Greek people."