EU Leaders Urge Greece to Stick To Bailout Plan

Posted November 3rd, 2011 at 4:40 pm (UTC-5)
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VIDEO: ReutersUS 3 – 11/3/2011 3:18:00 PM – BC-RREP-NOV03-GREECE-GOV

European leaders are welcoming the Greek prime minister's decision to scrap a referendum on the international bailout deal for his country.

George Papandreou backed out of his idea Thursday after German and French leaders made it clear that they would not allow Greek internal political squabbling to put the eurozone in jeopardy. German Chancellor Angela Merkel and French President Nicolas Sarkozy urged Greece to stick to the bailout plan reached last week if it wants to stay in the eurozone and get more funds.

The Greek financial crisis dominated the G20 meeting Thursday in the French resort of Cannes.

European Commission President Jose Manuel Barroso called for unity in Greece and warned that if there is no adequate response the government will have no money to pay for schools, hospitals and for the basic functioning of the state.

Mr. Sarkozy, who hosts the two-day meeting, said that Europe needed to implement credible, ambitious and fast measures to avoid default by the bloc's weaker economies. He called the common euro currency the “beating heart of Europe” and said it cannot be permitted to break up.

Mr. Sarkozy said the G20 leaders agreed to better coordinate their economic policies against the threat of another economic slowdown.

U.S. President Barack Obama said resolving the European financial crisis was the most important task of the summit.

Meanwhile, the European Central Bank unexpectedly cut its key interest rate Thursday by a quarter percentage point to 1.25 percent

The bank's new president Mario Draghi said the rate cut was necessary because there are stronger downside risks for Europe's economy in the coming months, and because that financial markets are in turmoil over the continuing debt crisis in Greece and other European Union countries.

The confrontation between the leaders of the Europe's key economies and debt-ridden Greece raised for the first time the possibility of a state being ejected from the 12-year-old euro zone, even leaving the European Union itself.

Prime Minister George Papandreou reversed his decision after the Greek opposition said it would back the bailout plan in parliament. But he rejected calls for his resignation and said it would be “catastrophic” to call early elections at this time.

The international bailout plan for Greece includes a 50 percent debt write-off, but it also imposes tough austerity measures on the indebted country.

Greece is in desperate need of the next $11 billion disbursement of its bailout fund.