Eurozone debt crisis: Markets dive on Greek referendum
Eurozone leaders agreed a 50% debt write-off for Greece last week as well as strengthening Europe's bailout fund.
But the Greek move has cast doubt on whether the deal can go ahead.
New York's Dow Jones fell 2% on opening. London's FTSE 100 was down 3%, while the Dax in Frankfurt and the Cac 40 in Paris were down about 5%.
Shares in banks saw the biggest falls, with Societe Generale falling 16.9%, BNP Paribas down 14%, Credit Agricole down 12.9%, Commerzbank falling 10.7%, Deutsche Bank down 10.3% and Barclays 10.5% lower.
German Chancellor Angela Merkel is due to discuss the Greek announcement with French President Nicolas Sarkozy on the telephone.
Italian Prime Minister Silvio Berlusconi said it was "an unexpected decision that generates uncertainties".
Confidence vote
Greek opposition parties have accused Prime Minister George Papandreou of acting dangerously, and called for an early election.
"Elections are a national necessity," conservative leader Antonis Samaras said, adding that Mr Papandreou was putting Greece's EU membership at risk.
A confidence vote is due to take place in the Greek parliament on Friday.
Mr Papandreou has 153 deputies in the 300-seat parliament, but has faced increasing dissent within his own party.
One of his MPs, Milena Apostolaki, resigned from the parliamentary group on Tuesday and six members of the party have called for Mr Papandreou to resign, according to the state news agency; Kazinform cites BBC.
To learn more go to www.bbc.co.uk
