Greek PM sticks with referendum

Greek Prime Minister George Papandreou insists that a referendum on a EU bailout will go ahead despite turmoil on world markets and stunned reactions from other eurozone countries.

He told a Cabinet meeting a referendum would offer “a clear mandate” on Greece’s staying in the euro.

But President Sarkozy of France said the decision “surprised all of Europe”. Stock markets have recorded big drops.

Mr Papandreou is due to meet European leaders in France on Wednesday.

The Greek prime minister held an emergency Cabinet meeting late on Tuesday.

In a statement later released by his office and quoted by Reuters agency, he says: “The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro.”

Mr Papandreou said Greece’s partners would support its policies.

He also said a possible alternative of snap elections would risk Greece defaulting on its debt.

The Greek government faces a crucial confidence vote in parliament on Friday.

The surprise announcement of a referendum – to be held at a date yet to be decided – led to sharp falls on European and US markets on Tuesday.

It threatened to unravel a deal reached at a EU summit last week aimed at resolving the euro debt crisis.

Leaders agreed on a 100bn-euro loan (£86bn; $140bn) to Athens and a 50% debt write-off.

But there have widespread protests in Greece against austerity measures demanded by the EU.

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