FACING MELTDOWN

ALL eyes will be on Athens this evening as politicians warn that the future of the country is at stake and the health of other eurozone countries is in danger.

There was relief when prime minister George Papandreou pulled back from holding a referendum on his country’s membership of the euro, but the future of his government is now in the balance.

The euro crisis and Greece dominated the first day of the G20 summit in Cannes.

French President Nicolas Sarkozy, who is hosting the event, warned: “If the euro explodes, Europe will explode. It is the guarantee of peace on a continent where there were terrible wars.”

He and German Chancellor Angela Merkel threatened that Greece would have to leave the eurozone if it did not accept the austerity measures.

This was the first time anybody raised the prospect of a country exiting the euro. However, the only way it could happen would be for Greece to leave the EU, according to a European Commission official.

Withdrawing his threat to hold a referendum, Mr Papandreou suggested that it had been a manoeuvre to pressure the opposition into supporting the austerity measures agreed last month.

During their three-day confidence debate, the opposition leader Antonis Samaras agreed for the first time to back the measures that they hope will convince the EU and the IMF to release €8bn needed before mid-December to keep the country afloat.

Talks were going on behind the scenes last night to convince the centre right New Democracy party to form a government of national unity with the ruling socialists, rather than run the risk of early elections and causing further turmoil.

Even if Mr Papandreou wins the confidence vote this evening, he is expected to resign and allow a new grand coalition government to appoint its own leader.

In the meantime, many fear a run on the Greek banks, with Finance Minister Evangelos Venizelos telling savers that the banking system was safe.

US President Barack Obama told the G20 that solving the European financial crisis was the most important task of the meeting. He recommended greater economic unity for the eurozone with the European Central Bank becoming more like the US Federal Reserve.

However, Ms Merkel insisted the ECB remains independent and will not become a prop to support stressed EU governments.

But there was a sense that EU leaders were losing control of the situation as, despite plans for a €1 trillion “big bazooka” facility to protect the euro, investors continued to lose faith in the currency’s third biggest member, Italy.