Markets down over euro fears

Mounting uncertainty in the eurozone continued to plague European markets Thursday as leaders from the world's wealthiest nations fought for a resolution to the region's debt crisis.In London, The FTSE 100 Index was more than 1 percent lower after EU leaders, in Cannes for the G20 summit, told Greece that its referendum on the hard-won rescue deal will decide whether it remains in the eurozone.German chancellor Angela Merkel and French president Nicolas Sarkozy told Athens it will not receive its next 8 billion euro (6.9 billion pounds) bailout tranche until the referendum has passed.Analysts here said, "It is certainly crunch time in Europe now with the next few weeks set to be nail-biting." Greek prime minister George Papandreou shocked the markets on Monday when he unexpectedly announced plans for a referendum on the eurozone rescue deal, which is now expected to be held December 4.Merkel and Sarkozy are understood to have effectively warned Papandreou that his debt-ridden country could be cast from the eurozone - the first admission that such an exit is possible.A rejection of the austerity plan by Greek voters could trigger a disorderly default on the country's debt that would probably cause massive losses for creditors and possibly spark a wider banking crisis that could send Europe into recession, the analysts warned.The banking sector was once again the big loser amid the increased uncertainty, with Barclays down 3 percent, HSBC off 2 percent, and Royal Bank of Scotland falling 1 percent.Meanwhile, problems in the eurozone are not limited within Greece, with Italian borrowing costs hitting eurozone record highs as prime minister Silvio Berlusconi pushed through a new budget plan that did not include plans to change tax rates or reform labour markets.