US president Barack Obama today said Europe had taken "important steps" toward resolving the debt crisis while at the G20 summit amid the prospect of Greece leaving the euro zone to preserve the 12-year-old single currency.
As a mini euro zone summit is taking place in Cannes, France, German chancellor Angela Merkel will be holding talks with Mr Obama.
At a press conference this morning with French president Nicolas Sarkozy, the US president said the French leader had shown "extraordinary leadership" in dealing with the euro zone crisis.
Mr Obama said the European Union had taken "important steps toward a comprehensive solution" of the region's debt crisis and now has to spell out the details. "The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe," the US president told reporters during a joint appearance with Mr Sarkozy.
"We're going to have to flesh out more of the details about how the plan would be fully and decisively implemented," he said, pledging the United States will be "a partner" during the crisis.
"It's no surprise that we spent most of our conversation focused on strengthening the global economic recovery so that we are creating jobs for our people and stabilising," Mr Obama said.
Mr Sarkozy, the summit's host, said that Europe must work "hand and glove with the US," adding: "We need the leadership of Barack Obama," he said.
Mr Sarkozy and Dr Merkel told Prime Minister George Papandreou in Cannes that Athens would not receive a cent more in aid - Greece was due an €8 billion aid payment this month - until it votes to meet its commitments to the euro zone.
Italian prime minister Silvio Berlusconi will call confidence votes to pass new economic measures agreed by his cabinet, he told his European partners at the G20 meeting today.
Few details were revealed after the cabinet meeting ended late yesterday, and Mr Berlusconi failed to force through more measures with an urgent emergency decree.
A government source told Reuters Mr Berlusconi reassured his partners in Cannes that the reforms, intended to boost growth and cut Italy's huge debt, would still become law quickly.
Mr Berlusconi told his partners the confidence votes would be held within 10-15 days and also pledged to quickly open talks with trade unions over reform of the labour market, the source added.
In Athens, Greece's powerful finance minister broke ranks with his prime minister, rejecting a proposed referendum on staying in the euro, hours after they received an ultimatum from France and Germany to make up their minds.
The growing chaos in Greece and uncertainty over the euro zone sent stocks and commodity prices lower in Asia, and fuelled a rush into safe-haven German bonds.
On his return with Mr Papandreou to Athens from Cannes, Finance Minister Evangelos Venizelos issued a defiant statement, saying Greece's euro membership was a historic achievement and "cannot depend on a referendum".
A finance ministry source said Mr Venizelos, who was kept in the dark by his Socialist rival about Monday's referendum call, opposed risking a public vote at this crucial moment. "Under these conditions, a referendum is exactly what the country does not need," the source told Reuters.
More dissident lawmakers in the ruling Pasok party spoke out against a referendum and called for a national unity government or early elections, casting doubt on whether Mr Papandreou can win a confidence vote on Friday or pass a bill to hold a plebiscite.
Euro area leaders talked openly for the first time of a possible Greek exit from the 17-nation currency area, seeking to maximise pressure on Athens and to preserve the euro in case of a Greek "no" vote.
Dr Merkel told a midnight news conference that while she would prefer to stabilise 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
The spectre of a hard Greek default and euro exit hung over a meeting of G20 leaders beginning in Cannes today, highlighting Europe's frailty just when 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.
The leaders of France, Italy and Spain, the German finance minister and the heads of the International Monetary Fund, European Central Bank and other top EU officials are meeting in Cannes t his morning to explore ways of accelerating the implementation of an anti-crisis package agreed on October 27th.
That plan, which includes debt relief for Greece, a recapitalisation of European banks and a leveraging of the bloc's rescue fund, the European Financial Stability Facility (EFSF), was meant to stem the two-year old crisis before Mr Papandreou's referendum call cast the bloc into turmoil again.
In the United States, heading into an election year, Mr Obama is worried the euro zone crisis could hit the struggling US economy.
Ben Bernanke, the chairman of the US Federal Reserve, announced yesterday the central bank was slashing its projections for growth and raising forecasts for unemployment.
Reuters
