National

Greece shocks markets over vote on bailout

ATHENS, Greece — Greece's prime minister held firm early today to his shock decision to call for a referendum on a hard-fought European debt deal, despite anger from abroad, market turmoil across the world and dissent from within his own party.

George Papandreou's government still faced a battle for survival with a vote of confidence scheduled for Friday and a grilling from frustrated European leaders expected later in the day ahead of a Group of 20 summit in the French Riviera.

After a grueling seven-hour Cabinet meeting, government spokesman Ilias Mossialos said Papandreou's ministers expressed "total support for the initiatives taken by the prime minister" and said the referendum would be held "as soon as possible."

However, government officials said two ministers still had strong reservations to the idea of a referendum, which will be the first in Greece since the country voted to abolish the monarchy in 1974.

World markets were hammered across the world after Papandreou's surprise Monday night announcement amid fears the vote could unravel a deal which took European leaders months of complex negotiations among themselves and with banks to reach.

Greece's general price index plunged to close down 6.92 percent, while in Germany the Dax index, the major stock market average, lost 5 percent — the equivalent of about 600 points on the Dow. The French stock market closed down 5.4 percent, the Italian 6.7 percent and London 2.2 percent. In the U.S., the Dow Jones industrial average fell 297.05 points, or 2.5 percent.

European leaders had made no secret of their displeasure.

"This announcement surprised all of Europe," said a clearly annoyed French President Nicolas Sarkozy, who has been scrambling to save face for Europe before he hosts leaders of the G20 major world economies later this week.

"Giving the people a say is always legitimate, but the solidarity of all countries of the eurozone cannot work unless each one consents to the necessary efforts," he said.

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