Greek cabinet backs George Papandreou's referendum plan

LONDON. November 2. KAZINFORM Greece's cabinet has given unanimous backing to a controversial plan by PM George Papandreou to hold a referendum on a EU debt rescue package. He told an emergency cabinet meeting that a referendum would offer "a clear mandate" for austerity measures demanded by other eurozone members.

Stock markets recorded big drops amid shocked reactions in eurozone capitals to the referendum announcement.

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

In a cabinet meeting lasting late into Tuesday night, Mr Papandreou told ministers the government needed the consent of the Greek people.

In a statement released by his office, he said: "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 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.

Following the seven-hour meeting, government spokesman Elias Mossialos said: "The cabinet expressed its support."

"The referendum will take place as soon as possible, right after the basics of the bailout deal are formulated," he added.

Monday's referendum announcement led to sharp falls on world markets on Tuesday. Asian markets also continued their slide on Wednesday.

World markets dropped sharply in reaction to the referendum call

The planned referendum 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 in return, Greece must make deep cuts in public spending, slashing pensions and wages and making thousands of civil servants redundant.

There have widespread protests in Greece against the measures.

Details also at http://www.bbc.co.uk/news/world-europe-15549352