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Greece debt crisis: Markets dive on Greek referendum Eurozone debt crisis: Markets dive on Greek referendum
(40 minutes later)
European markets have fallen following Monday's announcement of a Greek referendum on the latest aid package to solve its debt crisis.European markets have fallen following Monday's announcement of a Greek referendum on the latest aid package to solve its debt crisis.
Eurozone leaders agreed a 100bn-euro (£86bn; $140bn) loan to Athens and a 50% debt write-off last week. Eurozone leaders agreed a 50% debt write-off for Greece last week as well as strengthening Europe's bailout fund.
But the announcement of a referendum has cast doubt on whether the deal will be able to go ahead.But the announcement of a referendum has cast doubt on whether the deal will be able to go ahead.
The FTSE 100 in London traded 2.5% lower, the Dax in Frankfurt fell 3.8% and the Cac-40 in Paris dropped 3.3%. The FTSE 100 in London traded 2.1% lower, the Dax in Frankfurt fell 3.5% and the Cac-40 in Paris dropped 3.2%.
Earlier, the Nikkei in Tokyo closed down 1.7% and the Hang Seng in Hong Kong closed down 2.5%.Earlier, the Nikkei in Tokyo closed down 1.7% and the Hang Seng in Hong Kong closed down 2.5%.
Europe's main share markets had all fallen before the Greek announcement as well, with the FTSE, Dax and Cac-40 all dropping about 3% on Monday.Europe's main share markets had all fallen before the Greek announcement as well, with the FTSE, Dax and Cac-40 all dropping about 3% on Monday.
Opinion polls in Greece suggest that most people do not support the austerity deal. Opinion polls in Greece suggest that most people do not support the deal.
Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros through a series of measures including public sector pay cuts, tax rises and falling pensions.Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros through a series of measures including public sector pay cuts, tax rises and falling pensions.
There is concern that the referendum would be unlikely to take place before January, which would create months of uncertainty for the markets. "By definition, resistance to the bailout package... would imply a preference to find another route and the only other viable route would be an exit" from the euro, said Padhraic Garvey, an analyst at ING.
There is also concern that the referendum would be unlikely to take place before January, which would create months of uncertainty for the markets.
"We cannot wait until 15 January," said Konstantinos Michalos, president of the Athens Chamber of Commerce."We cannot wait until 15 January," said Konstantinos Michalos, president of the Athens Chamber of Commerce.
"Personally I do not think we will ever get there.""Personally I do not think we will ever get there."
A senior member of Chancellor Angela Merkel's coalition in Germany said he had been irritated by the referendum announcement.A senior member of Chancellor Angela Merkel's coalition in Germany said he had been irritated by the referendum announcement.
"The prime minister had [agreed] to a rescue package that benefited his country," Rainer Bruederle told Deutschlandfunk radio."The prime minister had [agreed] to a rescue package that benefited his country," Rainer Bruederle told Deutschlandfunk radio.
"Other countries are making considerable sacrifices for decades of mismanagement and poor leadership in Greece.""Other countries are making considerable sacrifices for decades of mismanagement and poor leadership in Greece."
He added that the only thing to do now would be to prepare for the Greek state to be insolvent and try to limit the damage to Europe's banking system.He added that the only thing to do now would be to prepare for the Greek state to be insolvent and try to limit the damage to Europe's banking system.
On the markets, shares in banks saw the biggest falls, with Credit Agricole down 8.6%, Societe Generale falling 10.4%, BNP Paribas down 8.6% and Barclays 7.7% lower.
On the currency markets, the euro fell 1% against the US dollar and 0.4% against the pound.
Greek opposition parties have called for early elections. The conservative opposition accused Mr Papandreou of acting dangerously.
A confidence vote is due to take place in the Greek parliament on Friday.
Mr Papandreou has 153 deputies in the 300 seat parliament, but has faced increasing dissent within his own party as well as through demonstrations across the country, some of them violent.