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Surprise Greek referendum sends stocks down

November 1, 2011 |  7:32 am


Stock markets fell sharply after the Greek prime minister called for a referendum on a European bailout package, raising fears that the freshly crafted rescue plan may fall apart.

In addition to the worrying news out of Greece, data released in Asia suggested that economic growth there may be slowing.

The Dow Jones industrial average was recently down 249.15 points, or 2.1%, to 11,705.86. The broader Standard & Poor's 500 index was down even more sharply, falling 2.3% or 28.38 points, to 1224.92.

In response to the uncertainty Tuesday morning, the New York Stock Exchange invoked a rule designed to help smooth trading when volatile conditions are expected.

The declines come after Monday's big drops and temper some of the optimism that sent stocks to one of their best months ever in October.

The optimism last week was fueled by the announcement of a European bailout plan that would help Greece avoid defaulting on its bonds.The plan was thrown into question Tuesday morning after Greek Prime Minister George Papandreou made the surprising announcement that he would let voters pass judgment on the plan, which pledges more aid for Greece but makes it contingent on further budget cuts in the struggling country.

The cuts have been deeply unpopular in Greece, and if the voters reject them it could lead the country to quickly default on its bonds. A default would likely send shock waves through the European and global financial systems.

Leading indexes were down 4.7% in Germany and 4.8% in France.

In Asia, data released in China and South Korea suggest that exports -- a key engine of economic growth -- slowed in October.


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-- Nathaniel Popper

Photo: Spencer Platt / Getty Images