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Five questions to watch on Greece #EuroMess

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If there’s one word that describes Europe right now, it’s Bloomberg uncertainty. Yesterday, Greek Prime Minister George Papandreou called for a referendum on the bailout deal crafted by European leaders. That deal would have absolved Greece of much of its private debt, but also would impose unpopular austerity measures on the nation. Markets, which jumped last week at news of a deal, declined again. Much still remains in flux, so here are five things to watch as events unfold across the Atlantic this morning:

1. What happens at the G20 summit in Cannes? All eyes are on Southern France this morning as international leaders make their way to a long-planned G20 summit. The conference pulls together industrialized and developing economies to, as my colleague Howard Schneider puts it, “compare notes on the world economy.” When the meeting opens tomorrow, a lot of that note comparing will no doubt focus on Greece. This will be the first meeting of many key European leaders, including French president Nicholas Sarkozy and German Chancellor Angela Merkel, since Greek announced its referendum. It will also bring a few, key international players, including the United States and China, into the room.

2. How does Papandreou’s meeting with Sarkozy and Merkel go? European leaders were taken by surprise when Papandreou called for a referendum on the bailout deal they had crafted. So today in Cannes, before the G20 summit kicks off, the two will hold an emergency meeting with the Greek prime minister on the issue. Sarkozy and Merkel have issued a statement saying they were still committed to “ensur[ing] the stability of the eurozone.”

The meeting won’t be a magic bullet; observers don’t expect it to take the Greek referendum off the table. But they do say it could offer clues as whether a strained Europe can work together in the coming days and months. Thomas Klau, head of the European Council on Foreign Relations’ Paris office will be watching for anything that shows all three countries acting jointly. “Anything that feeds into the impression that leaders are not acting jointly but each are obeying national dynamics, that’s going to be damaging to the markets,” he says.

3. What role do China and the United States play? Alongside the Greek bailout, another key element to the European debt deal hashed out last week was boosting the firepower of the European Union’s bailout fund (in more formal terms, the European Financial Stability Facility). While European leaders have agreed they want the fund to grow four fold to $1.4 trillion, they don’t know where, exactly, that new money will come from. China and the United States are eyed as potential investors, who will be watched closely in coming days.

“European leaders are looking for non-European partners to put up money,” explains Klau. “This would both help with crisis management, and boost the eurozone’s financial abilities, but also be seen as a sign of confidence in European leadership.”

4. What happens to the Greek government in Athens? A lengthy cabinet meeting that let out at 3 a.m. Wednesday came with good news for Papandreou: his cabinet would unanimously back his call for a referendum on the debt package. But observers of Greek politics say that, with the current fragility of the government, that doesn’t put us in the clear. Things could get messier if the opposition attempts to force an election, or Papandreou sees further departures from his party. “This week will continue to be one of much instability, much ‘what the hell is happening in Greece?’” says the London School of Economics’s Kevin Featherstone. “By the weekend, we should know a little more about where we’re headed.”

5. How do Greeks frame the austerity question? If the Greek government doesn’t collapse, observers expect the referendum would take place early next year. That leaves a decent amount of time for the politics around austerity to develop. While Americans observers largely expect Greeks to reject the austerity measures that would come with the European bailouts, experts across the Atlantic aren’t so sure. Many point to polls showing that Greeks strongly support remaining part of the euro currency; a “no” vote in the referendum bailout would near certainly end Greece’s membership. “It’s very difficult to predict at this point,” says Klau. “Things are changing so much each day.”

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