No Greek Referendum but bailout drama continues

After intense pressure from European leaders, the government confirmed it had dropped plans to hold a referendum on Greece’s euro zone membership, which had threatened an immediate crisis in the bloc, but remained some way from saving the bailout deal.

Papandreou says he announced the referendum on Monday — sending shockwaves through world markets — to ensure political consensus for the deal. His opponents have since said they will back it conditionally but accuse him of clinging to power.

Opposition politicians want Papandreou’s resignation and early elections as a price for their support for the bailout deal — which aims not only to save Greece from bankruptcy but prevent its problems engulfing bigger euro zone economies.

For euro zone leaders — and Greece’s battle to avoid a debt default — the worst possible outcome would be a stalemate, prolonging the agony over the 130 billion bailout which euro zone leaders agreed only last week.

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