Papandreou shocks Europe with referendum call

Greek Prime Minister George Papandreou took a tough stance today on his shock decision to call for a referendum on a hard-fought European debt deal even as he faced growing dissent within his own party.

The move, which was greeted with anger in Europe, sent markets in turmoil across the world.

George Papandreou's government however, faces a battle for survival with a vote of confidence scheduled for Friday. Meanwhile, he is likely to face a grilling from European leaders later in the day ahead of a Group of 20 summit in the French Riviera.

After a marathon seven-hour cabinet meeting, government spokesman Ilias Mossialos, said, the Papendreou's ministers expressed total support for the initiatives taken by the prime minister. He added the referendum would be held ''as soon as possible.''

However, according to government officials, two ministers still had strong reservations over the move. The referendum would be the first in Greece after the country voted to abolish the monarchy in 1974.

Meanwhile, world markets fell sharply after announcement of the shock move on fears over the fate of a deal which European leaders had concluded following months of complex negotiations among themselves and banks.