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As Greece flirts with chaotic default, a top deputy rejects prime minister’s euro zone referendum.
ATHENS, Greece — Prime Minister George Papandreou faced internal revolt Thursday after a top deputy broke ranks on a plan to let Greek voters decide on whether to accept a European bailout. (UPDATE 2: Papandreou indicated in a late-afternoon speech that the referendum on the euro zone is off.)
Papandreou, who on Monday proposed a debt-package referendum, called an emergency cabinet meeting Thursday after Finance Minister Evangelos Venizelos said Greece's place in the euro "cannot be put in doubt."
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"I have a duty to tell the Greek people the full and simple truth: If we want to protect the country we must, under conditions of national unity and political seriousness and consensus, implement without any delay the decision of October 26, now, as soon as possible," he said in a statement upon his return from Cannes.
In Cannes on Wednesday, German Chancellor Angela Merkel and French President Nicolas Sarkozy warned Papandreou and Venizelos that all aid to Greece is on hold until the referendum is decided. That includes an $11 billion installment of a $150 billion bailout negotiated in May 2010.
Greece is weeks away from bankruptcy without the $11 billion installment.
The October 26 agreement called for another $180 billion in public funds for Greece, as well as a 50-percent write-down of Greece's debt held by private investors. That write-down would save Greece about $140 billion.
Merkel and Sarkozy said the referendum in essence is about whether Greece wants to stay in the euro, even though Papandreou had framed it as a question about the latest rescue deal.
"Our Greek friends must decide whether they want to continue the journey with us," Sarkozy told reporters.
Papandreou has faced 18 months public discontent over austerity measures including tax hikes and wage cuts, but a revolt from within his cabinet may be insurmountable. A vote of no-confidence that was scheduled Friday may be cancelled depending on the outcome of the cabinet meeting.
The cabinet earlier supported the referendum, but Venizelos came out against it after the bleak warnings in Cannes.
Greek referendum: What should they vote on?
"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt," he said, adding that it cannot "depend on a referendum."