Berlin, Nov 2 (IANS): The planned Greek plebiscite on the bailout package reached at the eurozone summit and the associated austerity requirements have plunged financial markets into a frenzy, as the German DAX index slumped by five percent Wednesday.
Traders were apparently shocked by Greek Prime Minister Giorgos Papandreou's call for a referendum, as the Athens stock exchange index shed more than eight percent, Xinhua reported.
The announcement of the referendum has stirred turmoil in financial markets, as its consequences and a possible rejection of the requirements for austerity on Greece loom and put the outcome of the eurozone summit into question.
Both European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso reacted cautiously to the planned referendum, saying that they were "completely confident that Greece will fulfil its commitments it has agreed upon with the eurozone and the international community".
Luxembourg Prime Minister Jean-Claude Juncker stressed that the referendum was not favoured by most European leaders, and warned that if the Greeks voted against the new rescue package, the country's collapse could not be ruled out.
After a meeting with his key ministers, French President Nicolas Sarkozy said that the rescue plan is the "only way" to solve the debt crisis in Greece, and the leading European institutions must now make it clear the circumstances under which the bailout plan can proceed.
During telephonic talks, Sarkozy and German Chancellor Angela Merkel exchanged ideas about the possible consequences of the referendum and said in joint statement that both countries were determined "to ensure full and immediate implementation of summit decisions that are more necessary today than ever".
Germany and France were convinced that the agreement could have Greece returning to its normal track of sustained growth, and that subject should be put onto open discussion with the EU, the European Central Bank, the International Monetary Fund and representatives of Greece in Cannes.
Merkel will travel to the French town a day earlier than previously planned for the G20 summit, which will begin Thursday.
Finnish Prime Minister Jyrki Katainen said the decision of referendum by Papandreou was negative for the stability of Europe. Similar sentiments were expressed by the Danish Prime Minister Helle Thorning-Schmidt, who said that "does not help to calm the situation, given the debt crisis".
Swedish Prime Minister Fredrik Reinfeldt also criticized that "the referendum makes the uncertainties even greater because it is not clear when it will occur and what are the alternatives".
The spokesman for the Spanish government sees the announcement from Athens "not good news for Europe, and a solution to the Greek debt crisis would be delayed through a referendum, it's unfortunate for Europe".
The US government thinks that the Greek plan of referendum piles pressures on the EU, as the package of measures against the debt crisis ought to be implemented as soon as possible.
The rating agency Fitch views the planned referendum a threat to financial stability in the euro zone. The development underscores the need for a credible defensive wall must be built so that Greece could not infect and destabilize the area, said Fitch.