Markets dive on Greek referendum

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.

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%.

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.

Opinion polls in Greece suggest that most people do not support the austerity 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.

There is concern that the referendum would be unlikely to take place before January, which would create months of uncertainty for the markets.

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