Greece's political bombshell fallout

As I surmised yesterday the decision of the Greek prime minister to call for a referendum on the bailout terms came as a complete shock, producing fear and anger in the corridors of power in Europe. Reports suggest that any idea of using the referendum plan as a bargaining tool to secure better terms for the bailout have failed, indeed the IMF has stated that it is to withhold the next tranche of payments to Greece until after the referendum...and may be not then depending on the result.

France and Germany are pressing for the referendum question to be on remaining or leaving the eurozone, not acceptance or rejection of the bailout terms.  The Greek prime minister has a vote of confidence in the Greek parliament this Friday and it is by no means certain he will win.  Should he lose there could well be a general election, which presumably will render the referendum superfluous.

France's idea that China would be a knight in shining armour bringing funds to bear to persuade the markets that sovereign debt issues of a number of EU countries and banks have hit the yellow-brick wall.

Italy continues to wrestle with austerity measures.  The rise in lending rates to Italy suggests the markets have little confidence that any measures agreed will be implemented.

Latest News:  Greek referendum on 4th or 5th December - but what will be the question?

Further update: Greek referendum will be on 4th December on staying in the eurozone, not on the trms of the bailout:

http://www.telegraph.co.uk/finance/financialcrisis/8866261/Nicolas-Sarkozy-tells-Greece-If-you-dont-stick-to-the-rules-leave-the-eurozone.html

Below are links to relevant articles.  The one from Speigel Online is of particular interest as it considers the Greek government has made the correct decision to hold a referendum.

http://www.spiegel.de/international/europe/0,1518,795297,00.html

http://www.telegraph.co.uk/finance/financialcrisis/8863677/Greek-vote-sets-off-pandemonium-engulfs-Italy.html

http://www.telegraph.co.uk/finance/comment/damianreece/8863584/Greek-George-is-crazy-but-his-madness-still-reveals-an-ugly-truth.html

http://www.bbc.co.uk/news/world-europe-15553685
http://www.bbc.co.uk/news/world-europe-15555449
http://www.bbc.co.uk/news/business-15550422

http://www.spiegel.de/international/europe/0,1518,795426,00.html
http://www.spiegel.de/international/europe/0,1518,795143,00.html

http://www.telegraph.co.uk/news/worldnews/europe/eu/8865141/The-euro-tragedy-is-reaching-its-bloody-end-with-Greece.html

And finally, Simon Heffer got it right without the benefit of hindsight:
http://www.dailymail.co.uk/debate/article-2054103/Euro-summit-Smoke-mirrors-calm-markets.html