By RACHEL DONADIO and NIKI KITSANTONIS
November 3, 2011
ATHENS — After a tumultuous day of political gamesmanship, Prime Minister George Papandreou called off his plan to hold a referendum on Greece’s new loan deal with the European Union, opened talks on a unity government with his conservative opponents and vowed to continue in office despite rumors he would resign.
In an address to his party’s central committee on Thursday evening, Mr. Papandreou said there was no need for a referendum now that the opposition New Democracy Party had said it would back the debt deal. He invited that party to become “co-negotiators” on the new deal.
“The question was never about the referendum but about whether or not we are prepared to approve the decisions on Oct. 26,” he said, referring to the European Union debt deal. “What is at stake is our position in the E.U.”
Shortly afterward, the finance minister, Evangelos Venizelos, confirmed the cancellation of the referendum and added that the government would now seek approval of the loan deal from a full majority of 180 in Parliament, rather than the simple majority of 151 that has supported previous measures.
The developments re-established a tentative stability in Greece that still could be dashed. Mr. Papandreou must sweat out a vote of confidence scheduled for Friday, the outcome of which is far from assured. If he survives that, he and the opposition leader, Antonis Samaras, will have to negotiate their conflicting visions for the future. Mr. Samaras would like to see a transitional government of technocrats leading to early elections, perhaps in two months, while the prime minister prefers a coalition government that would rule for at least six months.
The decision to drop the referendum came after Mr. Samaras switched course and decided to back the loan deal, which would involve a 50 percent write down of Greece’s debt. Earlier, Mr. Samaras had been content to sit on the sidelines and score political points by opposing the deal and previous bailouts.
Speculation had been rife all day Thursday that Mr. Papandreou would abandon the referendum plan if the opposition would back the European deal. Before going into a brief emergency cabinet meeting, Mr. Papandreou suggested that he was prepared to walk away from the referendum proposal, saying that it “would not have been necessary if there had been consensus with the opposition.”
At first, Mr. Papandreou was said to have offered to resign before the confidence vote on Friday. By late afternoon, however, Greek news media reported during the cabinet meeting that he not only was refusing to resign but was in fact calling off the referendum plan. He only did so later in the day.
Mr. Papandreou had said the referendum was aimed at broadening consensus, which meant forcing the opposition to back the loan deal. Analysts said that he may have been happy to drop the idea once that goal was accomplished on Thursday.
After the cabinet meeting ended, Mr. Papandreou spoke with Mr. Samaras by phone.
Even if he survives the coming hours or days in office, the prime minister is widely seen as having expended nearly all his political capital. Ever since Greece asked for a bailout from the European Union in April 2010, he has struggled to satisfy seemingly irreconcilable constituencies: the Greek electorate and Greece’s foreign lenders, who have insisted on tough austerity measures in exchange for aid, pushing Greek democracy to the breaking point.
Mr. Papandreou had stood by his referendum plan when he met with European leaders in Cannes, France, on Wednesday, where they were gathering for the Group of 20 summit. The referendum announcement on Monday angered European leaders and threw the entire debt deal into chaos, causing turbulence in world markets.
Divisions within Mr. Papandreou’s government flared into the open on Thursday when Mr. Venizelos, and his deputy broke ranks with the prime minister to oppose a referendum, saying it could jeopardize Greek membership in the single currency euro zone.
Faced with the growing insurrection among his own ministers, who only a day earlier appeared to have rallied around the referendum plan, Mr. Papandreou called the urgent cabinet meeting on Thursday afternoon.