* PM under fire over referendum call on bailout
* Papandreou to meet French, German, EU leaders in Cannes
* EU partners surprised, angry
* Polls show most Greeks oppose deal
* Opposition parties protest, want snap elections
By Dina Kyriakidou and Lefteris Papadimas
ATHENS, Nov 1 The Greek government faced
possible collapse on Tuesday as ruling party lawmakers demanded
Prime Minister George Papandreou resign for throwing the
nation's euro membership into jeopardy with a shock call for a
Caught unawares by his high-risk gamble, the leaders of
France and Germany summoned Papandreou to crisis talks in Cannes
on Wednesday to push for a quick implementation of Greece's new
bailout deal ahead of a summit of the G20 major world economies.
The euro and global stocks were pummeled on financial
markets after the Greek move threw into question the survival of
crucial efforts to contain the euro zone's sovereign debt
Six senior members of Greece's ruling PASOK socialists,
angered by his decision to call a plebiscite on the 130 billion
euro rescue package agreed only last week, said Papandreou
should make way for "a politically legitimate" administration.
A leading PASOK lawmaker quit the party, narrowing
Papandreou's already slim parliamentary majority, and two others
said Greece needed a government of national unity followed by
snap elections, which the opposition also demanded.
Euro zone leaders thrashed out Greece's second financial
rescue since last year, in return for yet more austerity, in the
hope that it would ease uncertainty surrounding the future of
the 17-nation single currency.
Instead, financial markets suffered another bout of turmoil
on Tuesday due to the new political uncertainty and the risk
that austerity-weary Greeks could reject the bailout. Opinion
polls show most voters think it is a bad deal.
The euro fell nearly three cents against the dollar
and the risk premium on Italian bonds over safe-haven German
Bunds hit a euro lifetime high, raising Rome's borrowing costs
to levels that proved unsustainable for Ireland and Portugal.
"The referendum is a bad idea with a bad timing. The
post-summit rally is over," said Lionel Jardin, head of
institutional sales at Assya Capital, in Paris.
European bank shares dived on fears of a disorderly
Greek default and the Athens Stock Exchange suffered its biggest
daily drop since October 2008, with the general index
shedding 7.7 percent.
European politicians expressed incredulity and dismay at
Papandreou's announcement on Monday evening that took everyone
by surprise, including his own finance minister.
"Announcing something like this only days after the summit
without consulting other euro zone members is irresponsible,"
Slovak Finance Minister Ivan Miklos told Reuters.
Ireland's European affairs minister, Lucinda Creighton,
whose own country is struggling through an EU/IMF bailout
programme, said last week's European summit was meant to have
dealt with the uncertainty in the euro zone.
"And this grenade is thrown in just a few short days later,"
Creighton said. "Legitimately there is going to be a lot of
annoyance about it."
In a statement after French President Nicolas Sarkozy and
German Chancellor Angela Merkel conferred by telephone,
Sarkozy's office said: "France and Germany are determined to
ensure, with their European partners, the full implementation in
the quickest time frame, the decisions adopted at the summit,
which are today more important than ever."
The renewed uncertainty is bound to embarras G20 host
Sarkozy as he tries to coax China into throwing the euro zone a
It could also further undermine dwindling political support
in northern Europe for aiding Greece. Dutch Prime Minister Mark
Rutte told parliament in a letter his cabinet was concerned
about the risk of delay and uncertainty.
Business executives in Greece expressed despair at how the
country was being run and markets speculated on whether Italy
will be the next euro zone country to slide into a debt crisis.
"I think by late evening this saga will have come to an end
because he (Papandreou) will have lost the slim majority that he
has in parliament," Athens Chamber of Commerce head Konstantinos
Michalos told Reuters Insider television.
"This referendum will not happen. I'm hoping and praying for
a government that will join other political forces."
The chairman of euro zone finance ministers, Jean-Claude
Juncker, said Greece could face bankruptcy if voters rejected
the bailout package.
Papandreou, whose party has suffered several defections as
it pushes waves of austerity through parliament despite mass
protests, said he needed wider political backing for the budget
cuts and structural reforms demanded by international lenders.
But the conservative opposition called for snap elections.
"Elections are a national necessity," opposition New Democracy
party leader Antonis Samaras told reporters.
PASOK lawmaker Milena Apostolaki quit the parliamentary
group, reducing Papandreou's strength to just 152 seats out of
300 deputies before a vote of confidence later this week.
Fellow PASOK lawmaker Vasso Papandreou, who is not related
to the prime minister, asked the Greek president to work for a
national unity government to ensure Athens receives the rescue
funds, followed by early elections.
Papandreou did not even inform Finance Minister Evangelos
Venizelos he was going to announce the referendum on the latest
EU aid deal, a government official told Reuters.
"They must be crazy... this is no way to run a country,"
said a senior executive of one of Greece's biggest firms,
speaking on condition of anonymity.
One senior German parliamentarian suggested the euro zone
might cast Athens adrift, cutting off its aid lifeline and
allowing the nation to default on its huge debts.
"One can only do one thing: make the preparations for the
eventuality that there is a state insolvency in Greece and if it
doesn't fulfil the agreements, then the point will have been
reached where the money is turned off," Rainer Bruederle, floor
leader for the Free Democrats, junior partners in Merkel's
centre-right coalition, told Deutschlandfunk radio.
On the markets, players scurried for safer investments,
hammering stocks and punishing the euro.
The FTSEurofirst 300 index of top European shares
was down almost four percent, due not only to the possibility of
a hard Greek default but also to Europe's inability to stop the
debt crisis spreading to bigger economies such as Italy.
Banks exposed to Greece and Europe's bigger, troubled
economies, suffered most. Shares in France's Societe Generale
tumbled 17 percent and Credit Agricole was
down almost 12.5 percent.
Greece is due to receive an 8 billion-euro tranche in
mid-November, but that is likely to run out during January,
around the time of the referendum, leaving the government with
no funds if there is a "no" vote.