World economic powers confront eurozone debt crisis

The leaders of the world’s most powerful economies flew into France on Thursday for a G20 summit to confront a European debt crisis that threatens to plunge the global economy into renewed recession.

Under pressure from economic powerhouses China and the United States to put their own house in order, European leaders issued debt-laden Greece with an ultimatum on the eve of the summit in the French resort of Cannes.

U.S. President Barack Obama arrived in France early Thursday and was to meet European leaders before the start of the summit proper.

Late Wednesday, summit host President Nicolas Sarkozy and German Chancellor Angela Merkel warned Greece would not get “one more cent” from the EU and the IMF unless Athens abides by the terms of a rescue deal agreed last week.

Without its next eight-billion euro transfer, observers warn, Greece would face problems paying government salaries and a messy debt default within weeks.

After talks with Greece’s beleaguered Prime Minister George Papandreou, the visibly angry eurozone leaders insisted Wednesday that if he wanted to hold a referendum that he must do so as soon as possible to clear up uncertainty.

Papandreou agreed Greece’s future in the euro was at stake and said a vote could be called on Dec. 4. He did not reveal the wording of the referendum question, but he said he was sure Greek voters want to stay in the euro.

He insisted that it is the “democratic right” of the Greeks to vote on the bailout plan − which foresees more tight austerity measures − but added: “I believe that the Greek people want to be in the eurozone.”

He conceded that a vote puts the country’s euro membership at stake: “This is a question of whether we want to remain in the eurozone. That’s very clear.”

But his position was further weakened when two of his ministers, including Finance Minister Evangelos Venizelos, came out against a referendum. He now faces a confidence vote in parliament on Friday, and his survival is in doubt.

The G20 leaders, including Hu Jintao of China and Obama, will discuss Greece and the eurozone debt crisis at their first full session Thursday.

The White House said it wanted “unanimity of purpose” to emerge from the G20 and White House spokesman Jay Carney said the eurozone situation would be a key subject.

China’s Hu told the French daily Le Figaro: “China sincerely wants stability for the eurozone and the euro,” but without confirming that China would participate in the EU rescue fund.

On Wednesday Merkel and Sarkozy both said they hoped that Greece would remain in the eurozone, but warned that Athens would not get a free ride.

“The Greeks have to decide whether to continue the adventure with us or not,” warned Sarkozy. “We hope to continue with the Greeks, but there are rules that have to be respected.”

“The Europeans and the IMF can’t release the sixth tranche of loans to Greece until Greece endorses the package of Oct. 27,” Sarkozy said, calling for the referendum “if one is needed” to be carried out swiftly.

The European leaders also pledged to stand by the euro, even if the Greeks were to vote against it.

“If the Greeks say they do not want to stay in the euro, we will accept it, but we will not abandon the euro,” Merkel said.

“We do not want to let the euro be destroyed, we do not want to let Europe be destroyed,” stressed Sarkozy. “The Greek people are free to choose, but we are accountable for the stability of the euro zone.”

IMF chief Christine Lagarde said that the IMF would only decide on the next tranche of Greek aid after the referendum.

A recent poll indicated that most Greeks favor staying in the eurozone, despite hostility towards the tough rescue conditions.

On Monday, Papandreou shocked Europe by saying he would put the terms of the bail-out deal to a popular vote, sending panic through markets which thought the rescue plan a done deal.

The shock referendum overshadowed Thursday’s G20 summit, which Sarkozy had hoped could be a forum to relaunch a drive to reform global finance.

The referendum shock also increased the threat posed to Italy by its own debt mountain − forcing the costs of Italian government borrowing higher.