Politicians and markets shocked by Greek referendum on bailout plan

Greece once again caused a massive red wave on stock markets yesterday. The panic was triggered by the news that Greek PM Georgios Papandreou will call a referendum on the rescue package for the country, agreed with EU leaders. The vote will take place in January at the earliest, which means that markets will remain in the trap of uncertainty until then.

The proposal immediately hit the Euro which lost 1.6% against the US dollar, falling to $1.36 for €1. Throughout the day, the main European indices were in the red. Germany’s DAX slid 3.9%, France’s CAC40 –4.4%, and London’s FTSE - 2.4%. Across the Ocean, Wall Street also responded to the news about Greece with a depreciation: Dow Jones lost 1.89%, NASDAQ – 2.18% and S&P 500 - 2.19%.

The idea of a referendum shocked politicians as well. French President Nicolas Sarkozy and German Chancellor Angela Merkel held an emergency phone conversation, after which it became clear that they will do everything possible to implement the agreed rescue plan. Berlusconi described the idea as an “unexpected” decision, generating “uncertainty”. World Bank President Robert Zoellick warned that it could throw into chaos the European efforts to contain the fiscal crisis. Greece is threatened with bankruptcy if the country says “no” to the bailout package at the referendum, said Jean-Claude Juncker, PM of Luxembourg and President of the Eurogroup.

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