Merkel, Sarkozy call emergency meet after fresh Euro turmoil

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German Chancellor Angela Merkel and French President Nicolas Sarkozy will hold an emergency meeting ahead of the G20 summit in Cannes in the wake of Greek Premier George Papandreou's surprise referendum call on a proposed EU rescue package that re-ignited the euro zone debt crisis and triggered new turmoil in the financial markets.

The two leaders hurriedly organised a meeting ahead of the G-20 summit on Wednesday amid concern that the euro zone is heading for a long period of uncertainty and if the Greek voters rejected the rescue package, it will have far-reaching consequences for the stability of the euro and the nations using the single currency.

Merkel and Sarkozy during a telephone conversation yesterday reaffirmed their determination to ensure with their partners the full implementation of a comprehensive package of measures agreed by the EU leaders at their summit in Brussels last week to contain the debt crisis.

They agreed that a "full and speedy implementation of those decisions are more necessary now than ever," the German government said in a press statement.

Germany and France are convinced that the EU's new financial aid package for Greece will help it to return to sustainable growth, Merkel and Sarkozy said.

They expressed the hope that a time plan for the implementation of this agreement will be worked out shortly in cooperation with its European partners and the IMF.

They have invited Papandreou to join them in today's meeting and hoping that the Greek prime minister could be persuaded to give up his referendum plan, which was announced on Monday, media reports said.

Luxembourg's Prime Minister and chairman of the euro group Jean-Claude Juncker, European Commission president Jose Manuel Barroso, European Council president Herman Van Rompuy, managing director of the International Monetary Fund Christine Lagarde and newly-appointed president of the European Central Bank Mario Draghi also are expected to attend.

European governments and politicians reacted with shock and bewilderment to Papandreou's announcement to hold a referendum on the second rescue package just five days after the EU leaders reached a deal on a new strategy to prevent the debt crisis spreading to larger economies such as Italy and Spain.

They expressed fears that deal could fall apart if the Greek voters rejected the rescue package. Greece will have to implement further spending cuts, slashing of pensions and wages and job cuts of several thousand civil servants in return for the assistance from EU.

Greece has been facing a wave of violent anti-government demonstrations in protest against the government's austerity measures and the Greek public strongly oppose further spending cuts.

More than 60 per cent of the voters are against the new rescue package, according to opinion polls. Papandreou gave no date for the proposed referendum, but said it could be held within the next few weeks when details of the new rescue package are available.

The EU leaders had reached a deal with European banks last Thursday to write down 50 per cent of Greece's debts as part of the second bailout package of 100 billion euros on top of a 110 billion euro rescue package it received from the EU and the IMF in May last year.