ATHENS -- The European leaders who cobbled together a deal over dinner meetings in Brussels with bankers, investors and political elites to solve the Greek financial crisis and save the European Union forgot one thing: politics.
"It is not for others to decide but the Greek people to decide the fate of this agreement," Prime Minister George Papandreou told the electorate in Athens just days after the EU thought he had agreed to push the deal through the Greek parliament. "We believe in democratic participation — we are not afraid of it. This vote will be the foundation for a new Greece."
His call for a public referendum on the deal was met Tuesday with accusations of betrayal from France, shock from economists, stunned silence from Germany, markets plunged around the world and speculation was rampant that giving the people the final word could sink European banks and perhaps the EU itself.
"If you look at the markets right now — all of a sudden we are back at the beginning," said Carsten Brzeski, an economist with ING financial group in Belgium. "We had a huge summit, huge measures taken … but with a single announcement of a referendum, it's blown away in the wind."
In Greece, governing Socialist Party lawmakers revolted as Papandreou came under criticism and a confidence vote in the government was set for Friday. A referendum would not be held until January.
Government deputy spokesman Angelos Tolkas said the prime minister was sticking to his position as Greece Finance Minister Evangelos Venizelos — who has said he had been unaware of the decision in advance — remained in a hospital early Tuesday with stomach pains.
"The government is not falling, the government has made a choice which has drawn a rabid reaction, to ask all of society what kind of a country it wants in the future," Tolkas said.
It was only last week that a beaming Papandreou announced in Brussels after the marathon EU negotiations: "We can claim that a new day has come for Greece and also for Europe."
But reconsidering austerity measures and increased vigilance over their implementation that some call a loss of sovereignty, it seems the Greeks are balking — ducking for political cover by giving Greek voters, until now lacking a place at the bargaining table, a chance to be heard, analysts say.
"There was a huge effort made for the Greeks last week and I think if they want to continue to work together with their European peers this is very dangerous," Brzeski said. "If the result (of the referendum) was a no, then we would really have a very chaotic situation in Europe."
French President Nicolas Sarkozy held emergency conference calls Tuesday.
French newspaper Le Monde reported that Sarkozy was "appalled" by Papandreou's decision. "This move by the Greeks is irrational and dangerous," the daily newspaper reported his aides as saying. German media reported that German Chancellor Angela Merkel was "speechless, and in shock."
What a change from last week, when it was all smiles and relief as eurozone leaders talked about disaster being averted by a package of measures that included a second bailout for Greece and forgiveness of half of its debt owed to private investors.
But part of the deal was additional cuts in welfare benefits and state jobs for Greeks, as well as succumbing to the EU budget monitors permanently placed in Greece to see that they lived up to the terms of the agreement, a concession to Germany that rankled the public.
Some say if a referendum goes forward it will be a vote on whether Greece remains in the eurozone and can share in its currency, the euro, and its exemplary credit rating.
"The situation is so tense that it would in principle be a vote on euro membership," Finland's minister for European affairs, Alexander Stubb, told Finnish TV.
However, some observers say a "no" vote by the Greeks to the bailout package might not be such a bad thing.
"My guess is that the Greeks may be angry and Berlin may think they are lazy, but they are not stupid. And if they have any sense they will look at one overwhelming number: that even with the so-called 50% (debt forgiveness), the debt to GDP ratio will be 120% in 2020," said Irwin Stelzer, director of economic policy at the Hudson Institute, a think tank based in Washington, D.C.
"That's not sustainable," he said. "The only question is, how much pain will Greek voters have to bear until the default. If I was a Greek voter I would say, 'Let's get it over with, let's default now,' and do what Argentina did and resume growth after a default."
Since fears of Greece defaulting on its debt were first raised in 2010, the country has seen reform after reform, and increasing social unrest as the population felt the harsh effects of austerity measures to bring down the deficit. Papandreou's Socialist Party, which has been in power since October 2009 has borne the brunt of public anger, and has seen its popularity plummet as demonstrations and violence have broken out on the streets of Athens.
Still, should Papandreou's gamble for political cover pay off, the result could be a more secure future for both the Greeks and the eurozone as a whole, analysts say.
"If you work on the assumption that it would be a yes, what Papandreou does is move the country out of endless discussions about umbrellas and rescue packages and austerity and to bring it upwards to a national question: Where do you want to see the future of Greece?" said Ulrike Guérot, who specializes in European affairs at the European Council on Foreign Relations in Berlin.
Guérot said he believes that with a clear mandate from the Greek public to stay committed to being part of the eurozone, Papandreou would be in a strong position to implement the reforms needed to save Greece from defaulting on its debt, and confidence would be restored in Europe as a whole.
But that, say observers, is a big if. A recent opinion poll showed that 60% of Greeks held a negative view of the bailout. Analysts say if they carry those sentiments to the ballot box, it would almost certainly lead to Greece exiting the eurozone.
"We don't know legally how you do this. We don't know how to do it economically — to disentangle the drachma part of the euro. So it would be messy for sure," Guérot said.
Not any messier than life has already become for ordinary Greeks, say many in Athens.
"Whatever the EU does, nothing is going to work," said Kiki Tsartsabalidi, 30, who has been out of work for the last two years. "In our house, no one has a job."
Bhatti and Russell reported from Berlin