Stabilising euro more important than rescuing Greece – EU leaders

THE leaders of Germany and France told Greece last night it would not receive any rescue loans until after its referendum on the eurozone rescue plan.

They also made clear that saving the euro was ultimately more important to them than rescuing Greece.

The leaders also acknowledged that the referendum, which will likely take place on 4 December, could see Greece leave the currency union, which is the first official admission that such an exit is possible.

“The referendum in essence is about nothing else but the question, does Greece want to stay in the eurozone, yes or no?” German chancellor Angela Merkel said at a news conference.

After emergency talks with Greek prime minister George Papandreou, Mrs Merkel said: “We would rather achieve a stabilisation of the euro with Greece than without Greece, but this goal of stabilising the euro is more important.”

French president Nicolas Sarkozy hammered home the same message, adding: “Our Greek friends must decide whether they want to continue the journey with us.”

Mr Papandreou outraged European partners and caused panic on financial markets by announcing on Monday that Greece would hold a referendum on a second bail-out plan negotiated with eurozone leaders last week.

A “no” vote in the referendum would have enormous consequences not just for Greece but for the rest of Europe.

It could break up the 17-nation eurozone, lead Greece to a disorderly debt default, topple many fragile European banks and send the global economy spinning back into recession.

The Greek leader, looking chastened after a torrid dinner with EU decision-makers that Mrs Merkel called “tough and hard” on the eve of a summit of G20 major world economies, said the plebiscite would take place around 4 December.

“It’s not the moment to give you the exact wording, but the essence is that this is not a question only of a programme, this is a question of whether we want to remain in the eurozone,” Mr Papandreou said.

Despite opinion polls showing a majority of Greeks think the bail-out package was a bad deal for Greece, he said he expected more support from the wider population than he could muster in parliament.

“I believe the Greek people are wise and capable of making the right decision for the benefit of our country,” he said.

Mr Sarkozy and Mrs Merkel said eurozone finance ministers would meet next Monday to speed up decisions on leveraging the eurozone’s rescue fund to build a firewall to protect other weaker members of the 17-nation currency area.

The EU and IMF said Greece would not receive an urgently needed €8 billion aid instalment, due this month, until after the vote because official creditors wanted to be sure Athens would stick to its austerity programme.

Earlier, market analysts said they doubted whether Greece would be able to stave off a disorderly default for long enough even to hold a December vote.