Spain on Tuesday lamented the Greek government's decision to put its second bail-out package to a referendum, a move that sent shockwaves through the euro zone, driving stock and bond prices sharply lower.
The head of the ruling Socialist Party's slate in the elections on November 20, Alfredo Pérez Rubalcaba, described the latest upheaval in the single-currency bloc as a "bad decision" that "puts off a solution to the Greek crisis and to European instability."
"Greece decides to delay its correction and Europe, Spain included, is going to suffer from the decision," the former interior minister said. "What Greece does affects us, and in fact has been having an impact on us for 18 months now."
Public Works Minister and government spokesman José Blanco also bemoaned Greek Prime Minister George Papandreou's decision.
The blue-chip Ibex 35 index closed down 4.19 percent at 8,579.60 points after having shed over five percent at one point in the session. Spain's risk premium jumped 23 basis points to 375 after hitting a high of 385 basis points. That was just shy of the euro-era record high of 400, seen in early August.
The yield between the Italian benchmark 10-year government bond and the German equivalent jumped 35 basis points to 442 after hitting a record high of 455 basis points.
Market operators said the European Central Bank was buying Spanish and Italian government bonds in the secondary market.
The rest of the European bourse also suffered. The DAX in Frankfurt fell 5.00 percent, Paris' CAC 40 shed 5.38 percent, while the Euro Stoxx 50 was down 5.26 percent.
Spain's banks suffered badly, with Santander down 4.76 percent, and Caixabank off 5.98 percent.
Announcing his decision in parliament after the markets closed on Monday, the under-fire Greek prime minister, whose popularity has slumped in the wake of draconian austerity measures, said the poll would be held within the next few weeks. He will also submit his government to a motion of confidence in parliament. According to opinion polls, some 60 percent of Greeks are against the austerity measures applied to the bailout.
The reaction among other European leaders was also one of alarm. The Élysée quoted French President Nicolas Sarkozy as saying he was "dismayed" by the referendum news and said that he called German Chancellor Angela Merkel to discuss the latest development in the Greek saga.
"It's a very strange way to act," said Rainer Brüderle, the parliamentary leader of the FDP, Merkel's allies in the German government. "Many countries are making sacrifices because of decades of bad management in Greece. We have to get ready for the possible contagion from a financial collapse there."
Luxembourg Prime Minister and Eurogroup President Jean-Claude Juncker warned that a no-vote in the referendum could drive Greece into bankruptcy.
Juncker also talked to Sarkozy and Merkel and European Council President Herman Van Rompuy.