European Leaders Press Papandreou on Importance of Bailout Plan Ahead of G-20 Summit

European leaders convene to begin emergency talks today to tell Greece that there is no alternative to the austerity measures imposed by the bailout plan. Greek Prime Minister George Papandreou has been summoned to Cannes where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through the deal hammered out last week.

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The meeting is a response to Papandreou’s call for a referendum on the bailout plan that will essentially allow Greek citizens to reject austerity measures, thus breaking the deal between Greece and its troika of foreign lenders — the European Union, European Central Bank, and International Monetary Fund — making it almost certain Greece will default on its debt while putting other euro-zone nations, namely Italy, in danger of following in it’s footsteps.

Sarkozy, German Chancellor Angela Merkel, European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde, and other European Union authorities will meet today at 5:30 p.m. Papandreou will join the group, which intends to press the importance of Greece accepting the bailout plan as is, at about 8:30 p.m.

The meeting comes on the eve of the Group of 20 summit in Cannes, to be held on November 3 and 4, where European leaders had planned to present their plan to stamp out the crisis and end the threat to the global economy.They hoped to use the rescue agreement, which includes renewed commitments to fiscal austerity as well as new rescue resources, to anchor their economic agenda at the summit and secure support from their non-European counterparts.

Now leaders will have to wait on the results of the referendum, which could invalidate their strategy. Officials will also await the results of a confidence vote, which could see Papandreou’s government toppled.

“The risks engendered” by Papandreou’s move for a referendum and confidence vote “are profound for the euro in general, not just for Greece, as the expulsion of any one member state would critically undermine the Economic and Monetary Union,” said Yiannis Koutelidakis, of Fathom Financial Consulting in London, in a note yesterday.

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Such uncertainty “will likely block any” governments outside the euro-zone from participating in the reworked rescue fund, said Jacques Cailloux, chief European economist at Royal Bank of Scotland. While Brazil and Russia have already signaled a willingness to help, Chinese officials are awaiting further details. Without outside assistance, the ECB will be under pressure to keep buying the bonds of distressed nations.