Greek Prime Minister George Papandreou's hasty decision to call for a referendum on the Euro zone bailout package has caused adverse effects ranging from the fall of stock markets all over the world to fears of a global downturn.

The defense chief, top military leaders and 12 key officers have already been replaced following speculations of a planned coup.

Instead of getting better, the crisis in Greece has deteriorated after Papandreou proclaimed his proposal for a referendum which also came as a big shock to many Greeks, EU nations and the rest of the world.

If Greek voters decide against the pronouncements in the Brussels conference, observers believe that Greece would most likely leave the common currency.

Just before the G20 Summit in Cannes, the Greek leader is meeting with German Chancellor Angela Merkel and French President Nicolas Sarkozy to ensure that a positive vote in the referendum.

Greece has been given a stern warning that it would not be granted the £6.9bn of bailout money if the Greek electorate rejects the EU bailout package, according to the Guardian newspaper.

The deputy finance minister of China, Zhu Guangyao, has already announced that his government could not pour in investments in the European Financial Stability Facility (EFSF) due to the absence of technical details on the two new mechanisms. Beijing was also not expecting the referendum plan, the Zhu noted with concern.

Latest news reports showed that the German stock market gained 2.3%, France's 1.4% while in London, the FTSE 100 index rose 62.5 points, after two days of losses.

Nonetheless, the situation still remained volatile and European leaders announced that they are stopping aid payments to Greece until after the referendum is held. This will determine whether the debt-strapped nation becomes the first to exit the 17- country euro zone.

Markets continue to be apprehensive as analysts believe that the power of Papandreou is slowly weakening.