Greek PM stuns eurozone, markets with referendum call

Greek Prime Minister George Papandreou plunged the euro and stock markets back into crisis on Monday with a shock announcement that he would put a hard-fought rescue deal to a referendum.
With leaders of the world's 20 biggest economies getting ready for a summit from Thursday focused on the economic crisis, Papandreou's unexpected move triggered fears that the rescue efforts could begin to rapidly unravel.
Papandreou also announced a vote of confidence but his narrow parliamentary majority was then cut by the defection of a deputy.
Analysts said the confidence and referendum votes amounted to a ballot on the future of the eurozone which is also under new pressure from debt strains in Italy.
All of Europe's main stock markets registered sharp falls at the new risk of Greek default and contagion, with the German blue-chip DAX 30 stocks index trading 4.25 percent lower by midday and French shares down 4.03 percent.
And there was meltdown in Athens where Greek stocks plunged 6.31 percent amid warnings that a rejection of a deal that is deeply unpopular in Greece would force the country to leave the 17-nation bloc which uses the euro single currency.
"This is a referendum, in which they're effectively voting on Greece's euro membership," Alexander Stubb, the Europe minister for Greece's fellow single currency member Finland, told the commercial MTV3 network.
In a sign of the deep unease in European capitals, French President Nicolas Sarkozy and German Chancellor Angela Merkel were to hold talks by phone later in the day.
Papandreou, who now has 152 deputies in the 300-seat Greek parliament, has faced increasing dissent within his own party over the tougher austerity policy monitored by the EU and the Internatio-nal Monetary Fund that has sparked general strikes and widespread protests, many of them violent.
As well as agreeing to a referendum, which is likely to take place early next year, the prime minister will submit himself to a confidence vote in parliament to be held on Friday -- the second day of the G20 summit in Cannes.
"An expression of confidence in the policy to be followed is more necessary than ever," Papandreou said as he made his stunning declaration late Monday. "The command of the Greek people will bind us," the premier said.
"Do they want to adopt the new deal, or reject it? If the Greek people do not want it, it will not be adopted," the prime minister said after protests around the country last week against his government's austerity policies.
Although the deal agreed last Thursday after marathon talks in Brussels included an agreement to write off 100 billion euros ($137 billion) of debt owed by Greece, the Athens government still has to implement a painful package of austerity measures to get its hands of bailout funds.
In a survey in the To Vima news weekly on Sunday, 58 percent of Greeks termed the deal 'negative' or 'probably negative', although over 72 percent of those polled said Greece should remain in the euro.
In an online commentary, the Moneycorp currency broker said that Papandreou had presented Greeks with "the ultimate Hobson's Choice"."