Pressure grows on Greek PM to quit

Greek Prime Minister George Papandreou faced mounting calls to resign today, hours after European leaders told him he had endangered a massive bailout plan by calling for a referendum.

The instability in Greece sent ripples throughout Europe, with Premier Silvio Berlusconi's government in Italy teetering as well after its failure to come up with a credible plan to deal with its dangerously high debts.

Portugal immediately demanded more flexible terms for its own bailout.

Mr Papandreou was holding an emergency meeting with his ministers.

Several ministers and governing Socialist MPs called for a coalition national unity government that would approve the bailout package without a referendum, and ensure the country receives vital funds to prevent imminent bankruptcy.

Antonis Samaras, the leader of the main opposition party, also called for a transitional government to prepare for early elections.

Mr Papandreou's proposal on Monday to put the hard-fought bailout package to a referendum horrified Greece's international partners and creditors, triggering turmoil in financial markets as investors worried over the prospect of a disorderly default and the country's exit from the eurozone.

The drama in Athens dominated the G-20 meeting in the French resort of Cannes, where the leaders of the world's economic powerhouses had gathered to solve Europe's debt crisis, which threatens to push the world back into recession.

The crisis mounted today when Mr Papandreou's own finance minister, Evangelos Venizelos, broke ranks with him and declared the referendum a bad idea.

"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt," he said, adding that it "cannot depend on a referendum".

Mr Venizelos said the country's attention should be focused on getting a crucial instalment of bailout funds quickly. Europe reacted to Mr Papandreou's referendum plan by postponing payment.

"What matters now, is that we must save what we can, to remain united and to behave politically in such a way that we avoid divisive actions," Health Minister Andreas Loverdos said as he arrived for the cabinet meeting.

"We must keep the country at a position it reached after half a century of sacrifice - in the European Union and the eurozone."

Development Minister Michalis Chrisohoidis called for unity and said the priority was for parliament to ratify the new debt deal. "There can be no... return to the drachma and the past," Mr Chrisohoidis said.

The strong Greek rejection of Mr Papandreou's referendum proposal helped calm frayed nerves in the markets. Athens' main stock market outperformed its peers, rising 4 % in midday trading following three days of big falls.

In Cannes, French President Nicolas Sarkozy and German Chancellor Angela Merkel told Mr Papandreou that any referendum should be on whether Greece wants to stay in the eurozone or not, suggesting that it be held no later than December 4.

They said the country would not get the next, eight billion euro (£6.8 billion) batch of its existing bailout until after the vote.

But delaying payment until then could be disastrous: Greece has said that without the funds, the country will run out of funds in mid-November.

Alongside his referendum pledge, Mr Papandreou scheduled a confidence vote on Friday. With open rebellion among his ranks, it was unclear whether the government could survive that long.

Socialist MP Eva Kaili said she would not support the government in the confidence vote. Without her support, the Socialists hold a single seat majority in the 300-member parliament.

Another Socialist, Dimitris Kremastinos said the prime minister's credibility was at stake.

"The prime minister must summon a meeting of party leaders to issue a declaration that no referendum will be held on the euro," he said, and added his voice to calls for the creation of a national unity government.

Speaking in Cannes, Mr Papandreou said he was forced to call the referendum after it became clear there was no "broad support" from opposition parties for the bailout deal reached with the rest of the eurozone and big banks just a week ago.

Turning the referendum into a popular vote on whether Greece wants to remain in the eurozone is a risky bet that could lead to turmoil throughout the bloc.

"We cannot permanently ride a rollercoaster on Greece; we have to know where things are going, and the Greeks have to tell us where they would like things to go," said Jean-Claude Juncker, the Luxembourg prime minister who chairs eurozone finance ministers' meetings.