4 Nov 2011

Greek PM to stand down - report

2:37 pm on 4 November 2011

After a tumultous day in Greece, Prime Minister George Papandreou is reported to have struck a deal to stand down, admitting he made a mistake in calling for a referendum on the eurozone rescue package.

Reuters quotes government sources as confirming there is a deal to hand power to a negotiated coalition government if Mr Papandreou's rebellious MPs help him win a confidence vote on Friday.

At the same time, the opposition has demanded his resignation and called for a snap election.

Finance Minister Evangelos Venizelos has warned the country needs the next €8 billion tranche of aid within the next 12 days.

But Chancellor Angela Merkel of Germany has reiterated her threat the cash will be not be available unless Greece accepts the terms of the bailout.

Day of turmoil

The government was in turmoil on Thursday over Mr Papandreou's announcement of a referendum, which angered European leaders on Tuesday and sent shockwaves through the markets.

The government was on the verge of collapse on Thursday after several ministers said they did not support a referendum on whether to accept a European Union deal to solve the country's debt crisis.

Mr Papandreou said the referendum on the bailout would be scrapped if the opposition agrees to back the EU package.

At one stage, Opposition leader Antonis Samaras called for a caretaker government to safeguard the EU deal.

"If the opposition comes to the table to back the bailout, a referendum is not needed," Mr Papandreou said on Thursday.

He said he conveyed that message to European leaders in Cannes on Wednesday.

He reiterated that Greece's euro zone membership was not in question and that heading to elections immediately would entail a big risk of the country going bankrupt.

Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France made it clear to Mr Papandreou in Cannes that Athens will not receive its next round of emergency aid until the referendum is passed.

Finance Minister Evangelos Venizelos, speaking to MPs immediately after the prime minister, told them that Greece must say it is not holding a referendum.

Mr Papandreou faces a confidence vote in Parliament on Friday.