CANNES, France (AP) — European leaders' long-delayed admission that a break-up of their cherished common currency was a distinct possibility is overshadowing a two-day meeting of the world's largest and fastest growing economies beginning Thursday in this Cote d'Azur resort.
French President Nicolas Sarkozy is welcoming Barack Obama of the U.S., Hu Jintao of China as well as the leaders of India, Brazil, Russia and the other members of the Group of 20 leading world economies in the city made famous by its annual film festival, but the event is far from the star turn the unpopular French leader had hoped to make six months before he faces a tough re-election vote.
European leaders are holding another round of emergency meetings Thursday morning about Greece, this time including officials from Spain and Italy — two major eurozone members whose debts have rattled markets and who are seen as too big for Europe to bail out.
All attention is on what Greek voters will say in a referendum early next month on a sweeping European bailout plan. Sarkozy and German Chancellor Angela Merkel admitted in a late night press conference Thursday that they see the vote as a Greek choice between staying in the 17-member club of countries that use the euro or getting out.
A "no" vote could be devastating. It could lead to a disorderly Greek default, topple fragile European banks and send the global economy back into recession — and would threaten the cornerstone of European unity and decades of work toward integration on a continent wracked by centuries of war.
Sarkozy and other top EU officials have long held that it was unthinkable for Greece to quit the euro because it would be, Sarkozy has said, "a failure of Europe."
But in a late-night press conference with German chancellor Angela Merkel Wednesday, the leaders signaled for the first time that Greece's exit from the euro was indeed possible.
Saying that Europe had "done everything we could" to keep Greece in the eurozone, Sarkozy said "now it is up to them to decide if they want to stay in the euro with us."
That shift was prompted by the shock decision of Greek Prime Minister George Papandreou to call a controversial referendum on his country's $130 billion European bailout plan in early December that caught European leaders completely off guard and scrambling for a response.
European leaders tried pocketbook pressure, saying they would not release a euro8 billion in previously approved loans to Greece until the referendum results are in.
Papandreou, too, called the referendum a vote on Greece's future in the eurozone — prompting a rift even within his own party. He faces a parliamentary vote of confidence Friday.
Greek Finance Minister Evangelos Venizelos said "Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt."
Venizelos said it was important for the next bailout installment to be disbursed "without any distractions or delay."
Development Minister Michalis Chrisohoidis issued a statement calling for unity. "There can be no ... return to the drachma and the past," Chrisohoidis said. "We must all assume our responsibilities."
Papandreou's stunning announcement Monday that he would stage a referendum roiled world financial markets and threw into question an ambitious and costly European deal worked out in torturous negotiations a week ago.
Merkel confirmed that Greece did not inform the rest of the eurozone about the referendum. "This did not happen in a coordinated fashion," she said.
It's far from clear whether European leaders have worked out contingency plans for a Greek exit from the eurozone.
In case Greece does leave, "we are considering the issue of how we can ensure that no harm comes to our people in Germany, in Luxembourg, elsewhere in the eurozone," Luxembour Prime Minister Jean-Claude Juncker told Germany's ZDF television Thursday.
"We cannot permanently ride a rollercoaster on Greece; we have to know where things are going, and the Greeks have to tell us where they would like things to go," Juncker said. "I am very decidedly of the opinion that everything must be done so that one euro country does not leave the 17 — but if that were the wish of the Greeks, and I would find that wrong, we cannot force the Greeks."
Sarkozy had hoped the meeting of leaders of the Group of 20 leading world economies, in Cannes on Thursday and Friday, would be Europe's chance to assure the rest of the world that a comprehensive plan to deal with its debt crisis had finally been reached after nearly two years of half-measures and procrastination.
Papandreou's gambit ended that lofty ambition and likely derailed Sarkozy's hopes of transforming a successful summit into a boost to his own re-election chances.
The G-20 leaders are slated to discuss food security, reform of the international monetary system and the volatility of commodity prices — none of which is expected to get much attention or produce any solid conclusions at a summit so dominated by the European quagmire.
Anti-capitalist protesters have not been cowed by the European debt drama, and have staged demonstrations demanding a tax on all financial transactions, an end to tax havens and more aid for development.
Associated Press writers Elena Becatoros in Athens and Geir Moulson in Berlin contributed to this report.