Papandreou faces indigestible dinner with Sarkozy and Merkel

French President Nicolas Sarkozy and German Chancellor Angela Merkel are expected to rap Greek Prime Minister George Papandreou over the knuckles for announcing a referendum on the eurozone rescue deal at a working dinner Wednesday. But a Greek official insisted that they had been warned.

Reuters/Benoit Tessier

Tough questions were expected to be posed at Wednesday’s dinner, whose guest list also included EU President Herman Van Rompuy, EU commission chief Jose Manuel Barroso, eurozone chief Jeran-Claude Juncker and IMF boss Christine Lagarde.

Earlier Wednesday Barroso predicted pain for the Greeks if they reject the deal.

“The consequences would be impossible to foresee,” he said.

Sarkozy and Merkel were set to tell Papandreou that the vote must be on whether Greece stays in the eurozone or not, French officials said, marking the first time that they have openly envisaged the possibility of a country quitting.

French Prime Minister François Fillon said he “regretted” the move on Wednesday.

"The Greeks must say quickly and unambiguoussly if they want to keep their place in the eurozone or not," he said.

And German Foreign Affairs Minister Guido Westerwelle said that the rescue deal cannot be renegotiated.

But they were all warned of Papandreou's referendum plan, according to Greek government spokesperson Ilios Mossialos.

"He informed them of his intentions," Mossialos told Vima radio, while admitting that Papandreou gave no timing for the announcement, saying it was "confidential".

European stock markets rallied ahead of the dinner and Thursday’s G20 meeting in Cannes.

Germany’s Finance Minister Wolfgang Schaeuble faced an embarrassing task on Wednesday – he had to explain how a state-owned bank’s accounting error overstated his country’s debt last year to the tune of 55 billion euros.

It was due to a "misunderstanding" between the nationalised mortgage-lender Hypo Real Estate and the subsidiary which manages its problem assets, FMS Wertmanagement, he told a press conference.

His ministry only found out about the error on 13 October.