Greek PM Stands by Referendum, Rattling Markets

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Hours after convincing the Greek parliament to hold a national referendum on a rescue package for the debt-ridden nation, Prime Minister George Papandreou is now faced with the task of winning over irate European leaders.

News of the high-stakes vote triggered a massive sell-off across U.S. and global stock markets Tuesday. The Dow Jones industrial average dropped nearly 300 points.

The surprise decision threatens to unravel the hard-won $177 billion eurozone plan hammered out in Brussels last week. 

"A great lesson that I think we've seen all the way through this European debt crisis (is) that it's not over until that fat lady sings," said David Jones, chief market strategist for IG Index in London.

Last week's deal manages Greece's debt payments, while helping resolve Europe's broader financial crisis.
But Papandreou says he wants the Greeks to vote on the plan as a way of giving some of the responsibility to the people.

"We have a duty to give priority and highlight the role and responsibility of the citizen," he told Greece's parliament.
Many, however, see Papandreou's move as an attempt to pass the buck.
His own Socialist party is beginning to revolt. And on Friday, the government faces a confidence vote in parliament.

Tuesday's wave of selling on the New York Stock Exchange reflected concerns about what may happen in Greece.
Many believe the people could reject the eurozone plan because it would mean deep spending cuts for Greece.
CBN News Financial Editor Drew Parkhill warned a 'no' vote would cause Greece's debt payment plan to become uncertain at best.

"If Greece all of a sudden goes into default, then nobody knows what debts could go bad," he explained.  "That could just throw the European banking system into a mess."
Parkhill says such a development could lead the European economy into a recession -- and slow growth in the U.S.
The referendum won't likely happen until early next year, meaning more uncertainty about what will happen abroad and here at home.

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Heather Sells

Heather Sells

CBN News Reporter

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