Europe’s financial turmoil deepened, dominating a Group of 20 summit, as Greece’s government neared collapse and Italy came under renewed pressure to prove its credit-worthiness.
Greek Prime Minister George Papandreou sought to maintain power after his call for a referendum on a week-old bailout package split his party and led Europe’s leaders to suspend aid. Italian Prime MinisterSilvio Berlusconi was pushed by German Chancellor Angela Merkel to accelerate an austerity drive as his country’s bond yields jumped to a euro-era record.
The hardball tactics of Merkel and French President Nicolas Sarkozy toward their crisis-ridden neighbors underscored the urgency for world leaders meeting in the French resort of Cannes to solve the two-year-old debt woes that are weighing on the global economy. The European Central Bank offered relief with an unexpected interest-rate cut.
“The most important aspect of our task over the next two days is to resolve the financial crisis here in Europe,” U.S. President Barack Obama told reporters in Cannes between one-on- one meetings with Sarkozy and Merkel.
Papandreou will seek to stay in office and speak in parliament today, two officials with his ruling Pasok party said. He stood firm following a morning of speculation that he was poised to quit after Merkel and Sarkozy turned his ballot into a vote on whether Greece stayed in the euro area, cutting off assistance in the meantime.