Greek Drama: Papandreou gets shock vote of confidence
GREEK Prime Minister George Papandreou dramatically won a confidence vote in the Greek parliament last night after days of uncertainty sparked by his shock announcement to hold a referendum on the terms of the EU/IMF bailout loans necessary for the country to avoid default.
He won by 153 in favour to 145 against, paving the way for the payment of the latest tranche of €8bn in loans with the referendum now off the table.
But the eurozone is still in crisis despite his political masterstroke and it is unclear whether he can form a national government with the New Democracy party after he meets the Greek president where he is expected to propose this plan.
In another twist, Greece had almost became the sideshow at the end of a dramatic week when G20 leaders meeting in Cannes failed to come up with a solution to solve the eurozone debt crisis and the cost of Italian borrowing spiked towards the levels where it had to be propped up by the European Central Bank.
The International Monetary Fund will now monitor Italy's economic situation more closely with market focus next week expected to be as keen on Italy as Greece.
European stock markets closed lower today as traders nervously awaited the outcome the Greek situation while the failure by G20 leaders to come up with a plan also weighed on investor nerves.
The FTSE 100 Index lost earlier gains to fall 18.5 points to 5,527.2 while Germany’s DAX finished down 2.75pc and France’s CAC at 2.25pc as the political drama in Greece could still derail Europe's efforts to stem the debt crisis.
Traders had breathed a sigh of relief earlier in the week after Mr Papandreou did a U-turn on plans to hold the referendum after he came under pressure from French President Nicolas Sarkozy and German Chancellor Angela Merkel.
The proposal had caused a sharp sell-off on international stock markets earlier in the week.
And the eurozone rescue package is still not a foregone conclusion and investors are worried that if Greece defaults it could cripple European banks and cause fiscal strain on much larger European countries like Italy, which are too big to bail out.