BBC News with Jonathan Izard

The decision by the Greek Prime Minister George Papandreou to call a

referendum

on last week's European Union aid package has drawn a shocked reaction from political leaders and the financial markets. Shares have fallen sharply across Europe and in New York. Matthew Price reports.

In Athens tonight, the government at the centre of Europe's debt crisis is

hanging by a thread

. Members of the prime minister's own party have called for him to resign. An emergency cabinet meeting is being held. Around the world, markets have suffered huge losses, fearful that Europe's plan to contain the debt crisis is now not worth the paper it's written on. The Greek bailout is a crucial part of that deal. But now Greece's prime minister has surprised everyone, even his own finance minister, with the announcement that it will be the Greek people who decide in a referendum whether to take the next bailout and the associated

austerity

that will come with it. A poll at the weekend suggested a majority do not support the deal.

Events in Greece prompted urgent talks by telephone between the leaders of France and Germany. Afterwards, President Sarkozy said they had set up an emergency meeting to hear from Mr Papandreou. It will take place on Wednesday before a wider summit of European leaders and the International Monetary Fund. Mr Sarkozy said the deal struck last week to bail out Greece was the only way to resolve their problems.