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Opposition parties rounded on Papandreou, accusing him of blackmail and vowing to block the vote at all costs, and foreign European officials expressed dismay.

The Netherlands’ Labor party indicated that the referendum would be a “deal-breaker” for last week’s accord. The conservative Dutch government needs Labor’s support to achieve a majority in parliament in support of the deal, meaning Labor could effectively veto it.

A senior politician in Germany’s ruling center-right coalition said he was “bemused” by the announcement and made clear that a “no” vote would likely lead to a Greek bankruptcy.

“Then the other countries have to protect themselves, and Greece has to see by what means it gets out of its misery — whether they can stay in the euro, whether they leave, what they do,” said Rainer Bruederle, parliamentary leader of the Free Democratic Party, a junior coalition party, on Deutschlandfunk radio.

And Swedish Foreign Minister Carl Bildt tweeted: “I truly fail to understand what Greece intends to have a referendum about. Are there any real options?”

The referendum would be the country’s first since 1974, when Greeks voted to get rid of the monarchy, and is expected to be held early next year should the government get through the confidence vote.

The prospect of months of uncertainty has deflated any remnants of optimism over last week’s grand European plan to contain the debt crisis.

After long and complex negotiations, eurozone leaders agreed last Thursday that private holders of Greek bonds should take a 50 percent loss on their holdings, reducing Greece’s debt burden. They also agreed to boost the firepower of the bailout fund to euro1 trillion ($1.37 trillion) and to increase banks capital buffers.

Fears that the plan could come undone drove a broad retreat in global markets. Germany’s DAX and France’s CAC-40 both slid 5.2 percent but Italy’s main index fared even worse, slumping by 6.7 percent.

The euro fell 1.5 percent to $1.3648 while borrowing rates jumped higher for Italy and Spain, considered the next weakest links in the crisis.

In Athens, Greeks on the street were largely negative on the referendum. Former customs worker Panagiotis Kandylas said he expected the vote to go ahead, but added that “it will come tumbling down on (Papandreou‘s) head.”

The main opposition conservatives called for Papandreou’s resignation.

“In his attempt to save himself, Mr Papandreou set a divisive, blackmailing dilemma that endangers our future and our position in Europe,” New Democracy party leader Antonis Samaras said. “I explained to the president that New Democracy is determined at all costs — at all costs — to prevent such rash experiments, and it can do that.”

He did not elaborate on what he planned to do.

Pylas contributed from London. Geir Moulson and Juergen Baetz in Berlin, Sylvie Corbet in Paris, Raf Casert in Brussels and Victor Simpson in Rome also contributed to this report.