0945 local time: From Eric Reguly in Cannes

Reporters are just dribbling into the vast media centre in Cannes after a very late, but extraordinary, night which saw France president Nicolas Sarkozy and German chancellor Angela Merkel read the riot act to Greece: Either you're in or out of the euro zone, and if you're out -- guess what? -- no more bailout money for you.

Today, we're wondering if the G20 summit has already peaked even before it officially starts this morning. It feels like the story has already shifted back to Athens. Indeed, Mr. Papandreou faces a confidence vote in the Greek parliament Friday. If he wins -- his socialist Pasok party has paper-thin majority in the 300-seat chamber -- it is likely the referendum that so angered Mr. Sarkozy and Ms. Merkel will go ahead; the tentative date, confirmed last night by Mr. Papandreou, is Dec. 4 and the citizens' vote will effectively determine whether Greece stays put or flees the euro zone and re-embraces the old drachma.

So that leaves a full month of uncertainty that could be deadly to the Greek economy and ripple through through Europe. Greeks have already been yanking their savings from Greek bank accounts for fear that the banking system will collapse and that the clapped-out government might be incapable of honouring its deposit insurance. Now that the referendum is going ahead, expect a wholesale exodus of funds. That will put more strain on the banks. Some could be nationalized; others will be forced into mergers (a process that is already underway).

A couple of weeks ago in Athens, I interviewed an Alpha Bank manager -- a middle-aged woman -- who told me that her clients have been taking money from the branch since the financial crisis started in 2008 and and that the pace is accelerating. She said she is doing the same, even as she is required to put on a brave face to her clients, assuring them that their bank is safe.

The referendum will no doubt terrify bank clients. If Greeks opts for an exodus from the euro zone, the drachma will come back and economists guess that it would instantly lose half its value against the euro, wiping out the savings of millions of Greeks. The smart money is already gone into German, British, Canadian and offshore banks.

A run on the Greek banks, in turn, could accelerate the banking crisis in the other ailing economies in the euro zone. Will the Portuguese and Irish keep their savings in their banks?

Mr. Papandreou has a near impossible job between now and the referendum and it is nothing less than sparing Greek banks from a premature death. What is his plan?

Looks like another bad day ahead for global markets. Yesterday's soothing words by Fed chief Ben Bernanke have largely been forgotten.

From the Associated Press in Cannes:
"President Barack Obama says that the most important task for world leaders meeting at an economic summit in France is to resolve the European financial crisis.

"He says the European Union has taken some important steps toward a comprehensive solution but that the details need to be fleshed out about how the plan will be fully and decisively implemented. "

Harper's office sez FSB's powers and legal status to expanded tomorrow, giving new boss -- Mark Carney -- more say on global financial regs.

Prime minister Stephen Harper to make statement at G20 late this afternoon. What can he say other than encouraging euro zone to smarten up?

Harper's view on the euro zone fix up (from spokesman): "We'd prefer a reaction sooner rather than later." Not exactly a bold statement.

Meanwhile, in Rome ...yields on 10-year Italian bonds rise to 6.4 per cent. Later reports of ECB purchases sends rate slightly lower.

Split in Greek cabinet: Fin min Evangelos Venizelos NOT in favour of referendum, prime min Papandreou is. Looks like this gov is gonna crash

Will two European governments fall this week?:
MILAN (AP) — Premier Silvio Berlusconi's government teetered Thursday after its failure to come up with immediate growth measures to present to G-20 leaders in Cannes exposed growing fissures in the governing coalition and sent Italian borrowing rates again to dangerously-high levels.

Berlusconi met with his Cabinet late into the evening in an attempt to agree on a decree that would give immediate effect to emergency measures. Instead, Berlusconi goes to Cannes with proposed legislation, requiring approval by a divided Parliament , that would, among other things, sell off government property and privatize a limited category of local public services.

Scatch last Tweet: New exchange rate language to demand “more rapid exchange rate flexibility”.

Good morning. Just spoke to Athens. Papandreou's chief of staff Regina Vartzeli has announced he does not intend to resign...rumors persist.

My journey into Cannes was exceedingly bumpy as US AWACS surveillance jets guarding G20 forced passenger planes to fly low through clouds.

The Canadian G20 press conference in Cannes this morning exposed something odd. While Bank of Canada governor supports the Greek referendum, the office of prime minister Stephen Harper won't say whether Harper does too. All his spokesman would say is that the preem wants a "Europe-led solution" to crisis and wants the Oct. 27 EU summit anti-crisis measures implemented quickly. Could there be a split between the two?

Rogoff: "The odds that [Greece] will be gone from the euro within a few years are very high."

Inside the room-->> RT @ITVLauraK: Oh dear clearly not going well - Barroso, Von Rumpuy still in with Sarko, Merkel, Berlusconi and Zapatero

07:40 ET: Markets turning higher on prospects that Greek referendum will be cancelled
MILAN (AP) — European stocks gained Thursday amid mounting expectations that a Greek referendum on a European bailout plan will be abandoned.

In Europe, Britain's FTSE 100 swung between gains and losses before edging up 0.5 percent to 5,510. France's CAC-40 rose 1.4 percent 3,153 while Germany's DAX was 1.6 percent higher to 6,062. Athens' main stock market outperformed, rising by over 2 percent. The euro was also buoyed, rising 0.8 percent to $1.3798.

Wall Street appeared set to head higher, with Dow futures rising 0.2 percent to 11,792. Broader S&P 500 futures added 0.2 percent to 1,236.90.

Sarkozy looking remarkably well rested and relaxed in spite of long night. Maybe he found slapping Papandreou around cathartic.

Most alarmist view is normally calm FT likening Greece now to Bosnia in 1914: The Balkan mouse unleashing tigers. on.ft.com

RT @snorthfield45: Happy G20 day! We are live now with Globe correspondents Eric Reguly and Doug Saunders in Cannes. bit.ly

BBC saying Papandreou will step down to allow cross-party unity coalition govt to form bbc.in

Furthermore RT @stuartdhughes: URGENT BREAKING: Sources tell @bbcnews Lucas Demetrios Papademos could be the new Greek PM.

Denmark becomes the latest European country to lower its GDP forecast. Now expects growth of 1.1 per cent this year, compared to previous forecast of 1.3 per cent.