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France's Sarkozy Gathers Ministers After Greek Debt Bombshell

PARIS -- French president Nicolas Sarkozy called an unscheduled meeting with key government ministers and the central bank governor late Tuesday to discuss the potential fallout from the Greek crisis, a day after Greece's prime minister, George Papandreou, called a referendum on the eurozone's bailout of his country.

Sarkozy has convened Prime Minister Francois Fillon, Bank of France governor Christian Noyer, Finance Minister Francois Baroin, Budget Minister Valerie Pecresse and Foreign Minister Alain Juppe, a spokesman for Sarkozy said.

The emergency meeting comes a day after Papandreou stunned European leaders by calling a referendum on Greece's latest bailout, a move that could undermine eurozone efforts to rescue the debt-laden country and stabilize the region.

Papandreou's decision was announced just days after European leaders in Brussels agreed on a set of measures to reduce Greece's debt burden and beef up the firepower of the European Financial Stability Facility (EFSF), a rescue fund, to make sure the continent can prop up other troubled nations in the currency area.

Sarkozy is set to discuss the situation by telephone with German chancellor Angela Merkel, a spokesman said earlier.

Italian prime minister Silvio Berlusconi said Tuesday that he had "no doubt" that Greece's surprise decision to submit its austerity plans to a referendum was disturbing capital markets.

The spread of interest-rate differentials on Italian government debt over German bunds reached its highest level in the eurozone Tuesday. Italian shares also plunged, with the country's two largest banks each dropping by more than 10 percent.

The Greek decision "was unexpected and triggers uncertainty after the recent European Council meeting and on the eve of the G-20 summit in Cannes," Berlusconi said in a statement.

The German bank lobby group, BdB, weighed into the matter Tuesday, saying that Papandreou's announcement "has created substantial uncertainty in markets."

Michael Kemmer, managing director of BdB, said the work involved in planning last week's summit "will now be delayed, or at worst, put on ice."

He added that it was unclear what would happen if the Greek population were to say "no" to the bailout package.

Click here for more on this story from The Wall Street Journal.

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