PARIS -- European markets fell sharply early Tuesday following news of a Greek referendum on last week's bailout package agreed by the euro zone.

The BBC reports that the surprise announcement by Greece has cast doubt on whether the 100 billion euro ($140bn) loan to Athens, and 50 percent write off of its debt, will be able to proceed.

In Frankfurt, Germany's Dax benchmark financial index fell 3.8 percent in early trade, while the Cac-40 in Paris dropped 3.4 percent and London's FTSE 100 – not part of the euro zone – traded 2.5 percent lower.

Read more on GlobalPost: Europe reaches debt deal after marathon talks

French banks particularly suffered, reported Al Jazeera, with Societe Generale sliding 10 percent, BNP Paribas 8.9 per cent, UniCredit 8.1 per cent and Credit Agricole down 10 percent.

In Asia markets also fell, with the Hang Seng in Hong Kong closing down 2.5 percent and the Nikkei in Tokyo down by 1.7 percent.

Announcing the Greek referendum yesterday, Prime Minister George Papandreou said the Greek people should have the final say on the package, which includes a raft of austerity measures unpopular with the Greek public.

The New York Times reports that the referendum threatens the three-pronged agreement reached by European leaders to fortify the euro zone.

A rejection by Greek voters, the paper says, would likely be seen as a vote of no confidence in the government, and lead to early elections.

The NYT reports:

The anxiety stirred up by those fears hammered United States financial markets on Monday, showing once again how the domestic politics of even the smallest members of the European Union can create troubles that not only threaten the currency but reverberate around the globe.

According to the BBC, there are fears the referendum will not take place before January, “which would create months of uncertainty for the markets”.

