Greek prime minister George Papandreou has secured backing from his cabinet for a referendum on the next bail-out package.
The referendum is due to take place as soon as possible, with reports suggesting a December vote.
It has been a tumultuous couple of days for the Greek leader. Defence chiefs were sacked over speculation of a coup yesterday, in what was described as a reshuffle.
The Greek government will face a vote of confidence on November 4. It has already seen its tenuous parliamentary majority cut after another MP resigned on news of the referendum.
Greek authorities are set to meet with German leader Angela Merkel, French president Nicolas Sarkozy and the ‘troika’ – the European Commission, International Monetary Fund, and the European Central Bank – later today.
The FTSE100 has risen by 0.82 per cent in early trades.