Greek government on the brink of collapse

The Greek government teetered on the brink of collapse on Thursday over plans for a referendum on a euro zone bailout with turmoil in the ruling party casting grave doubt on whether Prime Minister George Papandreou can survive a confidence vote.

Conservative opposition leader Antonis Samaras demanded that a transitional government be formed immediately to run the country until snap elections, with the current parliament ratifying the financial rescue for debt-choked Greece.

State television and the state ANA news agency said that Papandreou would meet the Greek president after an emergency cabinet session on Thursday, without giving further details. However, the BBC, citing sources in Athens, reported that Papandreou would offer his resignation to President Karolos Papoulias.

Papandreou's chief of staff denied the prime minister intended to resign although sources within his PASOK socialist party said some senior lawmakers wanted a Greek former top official at the European Central Bank to head a new government.

"I don't think the government will last until tonight," said Costas Panagopoulos, managing director of pollsters ALCO.

Papandreou's surprise decision to call a referendum on the 130 billion euro bailout to save Greece from bankruptcy and prevent a global financial crisis provoked an uproar at home and across the euro zone.

Rejection of the package, which includes yet more austerity measures for the long suffering Greek electorate, would unravel the euro zone's plan for tackling its wider debt crisis, and cut off Greece's international financial lifeline.

Finance Minister Evangelos Venizelos broke ranks with Papandreou, coming out against holding the referendum after a bruising meeting with the German and French leaders, who made clear that Greece would not receive a cent more in aid until it votes to meet its commitments to the euro zone.

G20 crisis meeting
The specter of a Greek default and exit from the eurozone hung over a meeting of Group of 20 leaders beginning in Cannes on Thursday, highlighting Europe's frailty just when French president Nicolas Sarkozy wanted to showcase his leadership of the world's major economies.

The summit on the French Riviera had been meant to focus on reforms of the global monetary system and steps to rein in speculative capital flows, but the shockwaves from Greece have upended the talks.

President Barack Obama arrived Thursday morning ahead of separate planned meetings with Sarkozy and German Chancellor Angela Merkel, key players in trying to solve the European crisis.

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Obama has been a key player at past G-20 summits. But his role in these two days of meetings, his fifth G-20, was overshadowed by the situation in Europe.

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Greek exit?
Euro area leaders talked openly for the first time of a possible Greek exit from the 17-nation currency area, seeking to maximize pressure on Athens and to preserve the euro in case of a Greek "no" vote.

Germany's Angela Merkel told a midnight news conference that while she would prefer to stabilize the euro with Greece as a member, the top priority was saving the euro, not rescuing the Greeks.

The chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said policymakers were working on possible scenarios for a Greek exit.

"We are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the euro zone. We are absolutely prepared for the situation," Juncker told Germany's ZDF television.

France's Europe minister, Jean Leonetti, said bluntly the euro could survive without Greece.

"Greece is something we can get over, something we can live without," he told RTL radio in an interview.

Reuters and The Associated Press contributed to this report

Source: http://www.msnbc.msn.com/id/45144746/ns/world_news-europe/

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