FRANCO-GERMAN REACTION:FRANCE AND Germany have vowed to employ "whatever means necessary" to ensure a snap Greek referendum doesn't derail last week's EU summit deal.
Caught off guard by the Greek announcement, a harried German chancellor Angela Merkel has cleared her calendar to travel to Cannes today – a day earlier than planned – to consult French president Nicolas Sarkozy ahead of the G20 summit.
As European stock markets slumped, perplexed French and German leaders struggled to grasp the implications of the announcement and ordered Greek prime minister George Papendreou to the French Riviera city to explain himself.
Dr Merkel’s spokesman said the meeting, to be attended by senior officials from the EU and IMF, would “take all measures necessary” to ensure a “rapid implementation” of last week’s agreed summit measures.
German officials said Dr Merkel would use the meeting, beginning at 5.30 pm, to “read the riot act” to the Greek premier. The officials conceded they were caught by surprise, learning through news agency reports on Monday evening about the plan. They said there was no question of renegotiating last week’s summit conclusions.
“We still don’t know for sure if there’s going to be referendum and we don’t know when,” said one frustrated official in Berlin.
“We hope most Greeks would support last week’s deal but referenda are like opinion polls: the result would depend largely on how the question is framed.”
Speaking on the steps of the Élysée Palace last night after a hastily convened meeting with senior ministers and the governor of the central bank, Christian Noyer, Mr Sarkozy said the Greek announcement “took the whole of Europe by surprise”.
“France reiterates that the plan adopted unanimously by the 17 euro zone states is the only way to solve Greece’s debt problem,” he said.
While the French government avoided publicly criticising Greece, former industry minister Christian Estrosi – a close Sarkozy ally – rebuked Mr Papandreou, calling his decision “incomprehensible” and “totally irresponsible”. “When you’re in a crisis situation and others want to help you, it’s insulting to try to save your skin rather than face your responsibilities,” said Mr Estrosi.
Back in Berlin, after regaining their bearings, Dr Merkel’s allies tried to put a positive spin on developments.
“The referendum plan shows that Mr Papandreou means business with austerity and reforms and now wants a broad mandate,” said Peter Altmaier, CDU parliamentary leader.
CDU finance spokesman Michael Meister added: “Greece is a democracy so we have to accept this.”
But behind the scenes German government MPs conceded the latest twist in the euro crisis would make the Greek deal an even tougher sell to their own voters, if it didn’t kill it off entirely.
Such a surprise announcement risks confirming deep-seated negative views in Germany about Greek dependability, adding to deep-seated historical reservations about the wisdom of such votes.
Dr Merkel’s coalition partners said the announcement was “explosive”, with the Bavarian Christian Social Union (CSU) saying “Greece’s zig-zag path is no longer bearable”.
The junior Free Democrats (FDP) chief whip, Rainer Brüderle, said the announcement increased the likelihood of a Greek bankruptcy and “left EU leaders with very little room to manoeuvre”. A former economics minister, he urged EU leaders to prepare for the worst.
German opposition politicians praised the Greek leader’s move, described by the opposition Greens and Social Democrats (SPD) as “risky but courageous”.
Eurosceptics in France and Germany said it was proof that Greece had no future in the euro zone.
Leader of France’s far-right National Front Marine Le Pen said it was time for European leaders to come up with a “plan B” to prepare a winding down of the euro before “disaster and panic” strikes.
Germany’s Frank Schäffler, a rebel FDP parliamentarian, said it was clear from the announcement that “bailout politics no longer works. Greece cannot become competitive once more in the euro zone and should leave the euro club with a harsh haircut, followed by an aid programme.”
Share prices of large French banks and other lenders exposed to Greece and other weak euro zone countries fell sharply after the Greek announcement. Société Générale dropped 13 per cent and BNP Paribas and Crédit Agricole fell more than 10 per cent.
In Frankfurt, the DAX index had dropped 5 per cent by the close of trading.