EU Puts Greek Bailout ‘On Ice’ Amid Uncertainty, Juncker Says

A second European bailout plan for Greece has been put “on ice” because of uncertainty about the country’s future, said Luxembourg Prime Minister Jean-Claude Juncker.

“We now have to put on ice the solution we formulated” at a Brussels summit of euro-area leaders last week “because we don’t know how things will develop in Greece,” Juncker said on Luxembourg’s Radio 100.7 today. “Greece had the prospect of 8 billion euros which it has now forfeited.”

Europe’s financial turmoil deepened, dominating a Group of 20 summit in Cannes, France, amid speculation that Greek Prime Minister George Papandreou will quit after his call for a referendum on an international rescue split his party and cut off aid. The BBC reported that Papandreou, whose term runs to 2013, will step down today and propose a coalition government headed by former European Central Bank Vice President Lucas Papademos.

“I am of the view that we have to do everything possible to help Greece,” Juncker said. “That’s why we’ll continue to work on this. But what’s more important is that we erect so- called firewalls to prevent the Greek crisis from moving to Italy, Spain, Portugal and Ireland.”

Euro-area finance ministers meet on Nov. 7 to discuss how to leverage the region’s temporary bailout fund, the European Financial Stability Facility, Juncker said.

‘Overall Euro Crisis’

“I doubt that we’ll finalize this next Monday, but we’re working on it,” he said. “We won’t accept that the Greek crisis will lead to an overall euro crisis.”

Juncker said Papandreou hadn’t mentioned the referendum to his European Union colleagues at last week’s summit, and the timing of his announcement was “badly chosen.”

“We had an intensive discussion with Mr. Papandreou in Cannes yesterday about the entire situation and clarified that the actual question is whether the Greeks want to remain in the euro zone or not,” Juncker said. “It’s up to the Greeks to decide whether they want to remain in the euro zone, and if they do, it’s up to the Greeks to honor a number of commitments.”

Papandreou may withdraw his proposal for a referendum, an official with the ruling Pasok party said in Athens today. The official declined to be named.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net