The Greek government has scrapped plans to hold a referendum on the country’s bailout and membership of the eurozone.
Greek prime minister George Papandreou announced on Monday that a referendum would be held on the new £111bn bailout, which also includes a 50 per cent write-down of government debt and further austerity measures.
Shortly after reports of Papandreou’s possible resignation were dismissed this afternoon, the Greek prime minister was forced to backtrack on its earlier promise of a public vote on a bailout.
The U-turn followed an emergency meeting of the Greek cabinet, which was prompted when finance minister Evangelos Venizelos voiced his unhappiness at the mooted referendum
According to a text of Papandreou’s speech to his cabinet released to media, he says: “I will be glad even if we don’t go to a referendum, which was never a purpose in itself. I’m glad that all this discussion has at least brought a lot of people back to their senses.”
Papandreou still faces calls to form a transitional government and resign from his post. However, he has signalled that he is willing to speak to the opposition to achieve consensus on the bailout.
Yesterday, Papandreou spoke with Nicolas Sarkozy, the French president, and Angela Merkel, the German chancellor, on his decision to put the bailout to a public vote. Before the meeting, the offer of an €8 billion loan was temporarily withdrawn by the European Union.
The prime minister will also undergo a vote of confidence tomorrow, following three days of debate on the issue by Greek lawmakers.
At close the FTSE 100 was up 1.2 per cent to stand at 5546.