Markets Stunned By Greek Referendum Plan : The Two-Way Prime Minister George Papandreou wants the Greek people to vote on the bailout. There have been protests and anger, though, about the austerity measures that come with the aid. A "no" vote could cause a Greek default.

Stunned By Greek Plan For Bailout Referendum, Close Lower

Greek Prime Minister George Papandreou.

Yiannis Liakos/AFP/Getty Images hide caption

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Yiannis Liakos/AFP/Getty Images

Greek Prime Minister George Papandreou.

Yiannis Liakos/AFP/Getty Images

Update at 4:20 p.m. ET. U.S. Markets Slide:

The Dow closed 2.48 percent lower at close and Nasdaq finished 2.89 percent down on news that Greece panned to issue a referendum on whether to accept the latest rescue plan.

As The Wall Street Journal explains, the markets had an up-and-down day, with the the Dow dropping more than 300 points. Eventually the markets recovered some territory. The Journal explains that was because "Greek Socialist lawmaker Hara Kefalidou said she opposed the referendum. And a senior Socialist party official described the referendum as 'basically dead,' as four deputies have opposed it."

Our Original Post Continues:

"Markets plunged Tuesday on fears that Europe's plan to save the euro was already unraveling after the shock decision by Greek Prime Minister to call a referendum on the country's latest rescue," The Associated Press writes.

Stocks are down in European trading and the futures indexes point to a drop when markets open in New York, Bloomberg News says.

The Wall Street Journal writes that Greek Prime Minister George Papandreou is making "a high-stakes gamble that could undermine the international effort to preserve the euro." It reports that:

"A 'yes' vote in the referendum could deflate the massive street protests and strikes that threaten to paralyze Greece as it tries to enact a brutal austerity program to earn rescue loans from the euro zone and the International Monetary Fund. A 'no' vote, however, could bring down the government and cut off international funding for Greece, leaving the country facing a financial meltdown."

As the BBC adds, "there is also concern that the referendum would be unlikely to take place before January, which would create months of uncertainty for the markets."

Reuters says "European politicians complained that Athens was trying to wriggle out of the rescue deal agreed only last week, concerned not so much about the fate of Greece as the possibly dire consequences for the entire currency union."

Update at 12:15 p.m. ET. Still Down:

At midday, the Dow Jones industrial average is down about 2.25 percent. The S&P 500 is down about 2.5 percent. And the NYSE Composite index is down nearly 3 percent. (

Update at 9:45 a.m. ET. Stocks Drop In New York:

Shortly after opening, the Dow Jones industrial average is down nearly 250 points — about 2 percent. Other indexes are also lower.