Greece Referendum: What's Next?

Markets rallied off the lows midday Tuesday, on a headline citing a Greek Socialist Party officials that the call for a national referendum was "basically dead."

If this is true, the big issue is now the confidence vote on Friday.

Papandreou has a slim, two-vote majority left, and one confirmed resignation this morning. The betting is he will likely lose the slim majority he has and will step down.

This means an attempt to put together a new coalition or, failing that, early elections. That might take several months.

Some will undoubtedly argue that as part of a new government they should go back to the EU and renegotiate the package. Expect a lot of pushback. There is a G20 meeting later this week. Dow Jones is already citing a source saying that the G20 group will tell Greeks there is no alternative to the rescue package.

Would a Greek election with new leaders be good or bad news for the markets? New leadership may be needed, but in the short run it's a clear negative: investors want even higher risk premiums for euro-zone assets.

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