Update at 6:56 p.m. ET. French President Nicolas Sarkozy says that the next round of rescue loans will not be paid, until after Greeks vote on whether to accept the terms of the bailout package.
This is significant, because Greece has said it will run out of money some time this month and the referendum is so far slated for early December.
Greece's Prime Minister George Papandreou threw the European Union into crisis mode when he announced, yesterday, that he would call for a referendum on the bailout. Earlier today, he was summoned for talks with other EU members.
Our Original Post Continues:
There's word from Cannes, France, that European Union and International Monetary Fund officials are saying that beleaguered Greece won't be getting its next installment of financial aid — $11 billion — unless Prime Minister George Papandreou somehow convinces other leaders that his country is indeed going to live up to its side of a tough austerity agreement.
If the aid isn't forthcoming, that could lead to the collapse of the Greek government, a Greek withdrawal from the Euro and the spread of "financial contagion" to other weak economies on the continent, The Guardian says.
The Dow Jones newswire writes that when Papandreou "meets European officials Wednesday evening, he will be told in no uncertain terms that unless Greece provides clarity about its acceptance of the latest European bailout package, no money will be disbursed, according to a European Union official.
Reuters cites EU and IMF sources as saying the "sixth tranche of EU/IMF loans to Greece [are] unlikely to be paid until after Greek referendum is held."
Tuesday, Papandreou shocked other European leaders and sent financial markets reeling when he announced that the latest bailout package — and its austerity measures — would be put before Greek voters in a referendum. The announcement came as leaders of the so-called G-20 nations (including the U.S.) were preparing for a summit in Cannes that's scheduled to start Thursday. The agreement is not popular with Greeks.
French President Nicolas Sarkozy and German Chancellor Angela Merkel asked Papandreou to meet with them tonight to explain his decision. Their fear: The delay and uncertainty caused by a referendum could further endanger the Eurozone's economy.
Update at 7:37 p.m. ET: There's enough new news that we've started a separate post.
Update at 6:38 p.m. ET. Talks Continue:
The AP has moved two alerts that could be significant: First it reported that the Luxembourg prime minister said the Greek referendum on the bailout plan would be held Dec. 4.
And just moments ago, the AP reported, "French President Sarkozy says Greek rescue loans cannot be paid until after referendum."
If those two things hold true, it could put Greece in a tough spot and lead to the dire predictions we mentioned earlier in this post. Dow Jones reported that officials predict Greece could run out of money "anytime in the next month."