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Market watchers will be braced for more turmoil Wednesday, after the cabinet of Greek Prime Minister George Papandreou gave its unanimous support to call for a referendum on the European plan to bail out the country's debt-ridden economy.

A spokesperson for the Greek government said cabinet ministers had agreed in a marathon meeting to hold the referendum "as soon as possible," after the details of the debt deal have been hammered out.

Earlier, Papandreou's call for a nationwide plebiscite on the debt deal and Greece's role in the European Union rattled global stock markets.

European leaders recently announced plans to boost a pan-continental bailout fund to a value of 1 trillion euros, while also forcing private bondholders to accept a 50-per-cent writedown on Greek bonds. Those measures, combined with new reserve requirements for big banks, were expected to help contain the debt crisis and to cut Greece's debt burden by one-third over the next nine years.

But Papandreou's startling announcement late Monday to hold a referendum on the debt deal spooked markets and raised fears that Greek voters could derail plans that European leaders spent weeks negotiating.

In North America, markets opened on Tuesday morning and nosedived before rallying. Still, the Toronto Stock Exchange closed down 136.95 points to end the session at 12,115.10. Meanwhile, the New York Stock Exchange finished the session at 7338.32, down 225.06 points.

Meanwhile, Canada's central bank governor expressed confidence that Europe would contain the debt crisis, but he noted that continent likely faces a "brief recession" in the months ahead.

Speaking to CTV's Power Play Tuesday, Mark Carney said it will take years for Europe to fully solve its debt problems, but he noted that its leaders are taking the steps needed to stop the debt crisis from spreading.

"What's important is that the situation is contained," he said, adding that implementing the huge rescue fund effectively is a chief concern. "They need to put that into place, because to address all these issues is going to take years not weeks … they have to follow through."

The main concern now is that Greece won't be able to pass its austerity and bailout plans, plunging the nation and the continent into a debt crisis. The fear is that the malaise would spread and create an economic domino effect that could spread globally.

"While it may be the democratic thing to do ... what will happen if Greek votes ‘no', which is possible given how unpopular the bailout plan appears to be amongst Greece's voters," said Michael Hewson, a markets analyst at CMC Markets.

"The resulting fallout could well result in a complete meltdown of the European banking system and throw Europe into turmoil."

In Greece, opposition party members are blasting Papendreou's decision, as are at least six members of the prime minister's own Socialist party.

"Mr. Papandreou is unscrupulous and dangerous," said Yiannis Michelakis, the spokesperson for opposition conservatives in Greece.

"He has tossed Greece's participation in Europe into the air like a coin … Instead of seeking ways to extract us from our impasse, he is presenting the Greek people with the ultimate blackmail."

Greek media reported Tuesday that six Socialist lawmakers wanted Papandreou to resign, while lawmaker Milena Apostolaki defected from the party in the wake of the prime minister's call for a referendum.

"The crisis in the country has taken on uncontrollable dimensions and is threatening the cohesion of Greek society," Apostolaki said in a letter announcing her resignation from her party seat.

Vasso Papandreou, another Socialist lawmaker, called for the creation of a new cross-party government that would ensure that the debt deal is approved and moves ahead.

"The country is in danger of immediate bankruptcy," said Papandreou, who is not related to the prime minister.

Jacques Cailloux, an analyst with the Royal Bank of Scotland, said that Papandreou's move to hold a referendum will make the international community less likely offer assistance to Europe at the G20 meeting in France later this week.

"The added uncertainty surrounding a potential referendum in Greece will likely block any new potential financial support from countries outside the monetary union given the potential implications for the future of the Union," Cailloux said.

"We thus view this as a major negative for Greece and the rest of the monetary union."

Last month, North American markets were gaining because it appeared that Europe was on its way to sorting the continent's deep debt problems, but with Monday's referendum news out of Greece, the spectre of a banking meltdown has returned, said Craig Wright, an economist with RBC Capital Markets.

"It just speaks to the volatility," he told Power Play. "Now that worse case scenario … has been put back on the table."

Wright said that in terms of Canada's economic outlook, the upcoming October job data out of the U.S. will be an important barometer. If the U.S. continues to show modest job growth and increased demand, he noted, Canada's export-heavy economy will likewise benefit.

With files from The Associated Press and The Canadian Press