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G20 leaders in desperate struggle to rescue euro

US president Barack Obama has arrived in France to join world leaders at a G20 summit overshadowed by Europe's debt crisis and surprise plans by Greece to hold a referendum on the EU bailout deal.

French leader Nicolas Sarkozy is hosting the two-day meeting of the world's largest and fastest growing economies in Cannes, the Cote d'Azur resort known worldwide for its annual film festival.

Mr Obama is due to meet Mr Sarkozy and German chancellor Angela Merkel separately later today. Mr Sarkozy and Mrs Merkel helped strike a ¤94bn bailout deal for Greece -- but the Greek prime minister George Papandreou's surprise announcement of a December referendum is raising doubts about the deal.

The White House says the US can help guide Europe through its financial crisis but that it is ultimately Europe's problem to solve.



failure

Mr Sarkozy and other top EU officials have long held that it was unthinkable for Greece to quit the euro because it would be, Mr Sarkozy has said, "a failure of Europe".

But in a late-night press conference with German chancellor Angela Merkel, the leaders signalled for the first time that Greece's exit from the euro was indeed possible.

Saying that Europe had "done everything we could" to keep Greece in the eurozone, Mr Sarkozy said "now it is up to them to decide if they want to stay in the euro with us".

Mr Papandreou's stunning announcement on Monday that he would stage a referendum stirred up world financial markets and threw into question a European deal worked out a week ago.

Mrs Merkel confirmed that Greece did not inform the rest of the eurozone about the referendum. "This did not happen in a coordinated fashion," she said.

She and Mr Sarkozy summoned Mr Papandreou to Cannes for talks yesterday at which European leaders expressed their anger and pressed him to hold the referendum as soon as possible.



disorderly

A no vote in the referendum would have enormous consequences, not just for Greece but for the rest of Europe.

It could lead to a disorderly Greek default, force Greece out of the 17-nation eurozone, topple many fragile European banks and send the global economy spinning back into recession.

Mr Sarkozy's office announced yet another round of discussions about Greece for today, with Germany, Italy, Spain, the IMF and the European Union. The talks will notably not include Greece itself.

hnews@herald.ie


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