On a day of high drama, Greece called off a plan to hold a referendum on a bailout package for the country proposed by the European Union.
Greek Prime Minister George Papandreou gave into pressure from France, Germany and from within his own country to back out from the bailout vote. Papandreou said he was open to scrapping the referendum if the opposition backed the bailout package.
Most European and US markets were trading in the green late Thursday evening on the back of speculation that Greece would scrap the referendum. They rose further on news of the vote’s cancellation.
Most Asian markets closed in the red earlier in the day when it was believed the vote was very much on. Both the Sensex and the Nifty indices in India closed marginally up.
Early in the day, Papandreou flew back to his country from Cannes and won the support of his cabinet for the referendum that many say
was not about the bailout package but whether the country wanted to remain a part of the EU.
Calls for his resignation grew louder by evening it was unclear whether Papandreou could survive a confidence vote on Friday. Confusion ruled till Papandreou, in an address to the Greek parliament at around 6pm local time called off the referendum. The cancellation means the bailout package for Greece that was worked out on October 26 stays. And it lowers the risk of a sovereign default by Greece.
On Thursday, the focus at Cannes ranged from a structural response - this will entail rebalancing the global economy, from economies with a surplus on the current account to deficit nations -- aimed at tiding over the crisis in the Euro zone to policy measures to ensure a global recovery.
In effect, the meeting became one big firefighting exercise. G20 leaders discussed a larger role for the International Monetary Fund in resolving the European debt crisis.
The Bric countries (Brazil, Russia, India, China) held talks but carefully skirted the question of investing in the Euro zone bailout facility. Instead, they stressed the need for Europe to come up with a package to solve the debt crisis. The countries also agreed to hold the next Bric summit in New Delhi, on March 29.
The inability of the Euro zone to manage the debt crisis could set off a global contagion. And, given that most countries have depleted their firepower in dealing with the last crisis in 2008, they will be hard pressed to fend off the ill effects.
With inputs from agencies