Fears grow that euro debt deal is unraveling
Source: Agencies |
November 2, 2011, Wednesday
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Print Edition
Print Edition
Markets plunged yesterday on fears that Europe's plan to save the euro was unraveling after Greece's leader unexpectedly called a referendum on the country's latest rescue package.
Markets fear Greek Prime Minister George Papandreou wouldn't be able to pull off a victory - assuming that his government holds together.
The implications for Greece and Europe of a "no" vote in a referendum are massive - it would imperil Greece's membership of the euro and could cause a messy debt default, which would hurt banks and global markets.
"Talk about your all-time bonehead moves," said Benjamin Reitzes, an analyst at BMO Capital Markets. "It would reintroduce the risk that Greece could face a disorderly default and potentially be forced to leave the euro."
Papandreou stunned markets and even his own citizens and fellow eurozone partners by announcing late Monday that a vote will be held. A confidence vote in the Socialist government will also take place at the end of this week.
The news dealt a huge blow to the European debt deal, in which confidence had already been fading.
On Monday, sentiment was already turning sour after US brokerage firm MF Global filed for bankruptcy amid reports that it had bought too much bad European debt and fears over the public finances of Italy, the eurozone's third-largest economy.
In Europe, the FTSE 100 index of leading British shares fell 2.7 percent to 5,393, while Germany's DAX slid 4.7 percent to 5,857. The CAC-40 in France was 5 percent lower at 3,081. Greek shares led the retreat with the main exchange in Athens down 6.9 percent.
Italy's stock market fared even worse, trading 6.3 percent lower as its borrowing costs spiked in the bond markets. The yield on Italy's 10-year bonds was up another 0.21 of a percentage point to 6.20 percent, having earlier risen to 6.30 percent. The euro was 1.4 percent lower at US$1.3655.
Wall Street suffered a big retreat, too - the Dow Jones industrial average was down 2.5 percent at 11,640 while the broader Standard & Poor's 500 index slid 2.9 percent to 1,218.
Earlier in Asia, stocks fell sharply. Japan's Nikkei 225 index retreated 1.7 percent to close at 8,835.53. Hong Kong's Hang Seng lost 2.5 percent to 19,369.96 and Australia's S&P/ASX 200 shed 1.5 percent to 4,232.90. Benchmarks in Singapore, India, Indonesia and Thailand were also down.
Markets fear Greek Prime Minister George Papandreou wouldn't be able to pull off a victory - assuming that his government holds together.
The implications for Greece and Europe of a "no" vote in a referendum are massive - it would imperil Greece's membership of the euro and could cause a messy debt default, which would hurt banks and global markets.
"Talk about your all-time bonehead moves," said Benjamin Reitzes, an analyst at BMO Capital Markets. "It would reintroduce the risk that Greece could face a disorderly default and potentially be forced to leave the euro."
Papandreou stunned markets and even his own citizens and fellow eurozone partners by announcing late Monday that a vote will be held. A confidence vote in the Socialist government will also take place at the end of this week.
The news dealt a huge blow to the European debt deal, in which confidence had already been fading.
On Monday, sentiment was already turning sour after US brokerage firm MF Global filed for bankruptcy amid reports that it had bought too much bad European debt and fears over the public finances of Italy, the eurozone's third-largest economy.
In Europe, the FTSE 100 index of leading British shares fell 2.7 percent to 5,393, while Germany's DAX slid 4.7 percent to 5,857. The CAC-40 in France was 5 percent lower at 3,081. Greek shares led the retreat with the main exchange in Athens down 6.9 percent.
Italy's stock market fared even worse, trading 6.3 percent lower as its borrowing costs spiked in the bond markets. The yield on Italy's 10-year bonds was up another 0.21 of a percentage point to 6.20 percent, having earlier risen to 6.30 percent. The euro was 1.4 percent lower at US$1.3655.
Wall Street suffered a big retreat, too - the Dow Jones industrial average was down 2.5 percent at 11,640 while the broader Standard & Poor's 500 index slid 2.9 percent to 1,218.
Earlier in Asia, stocks fell sharply. Japan's Nikkei 225 index retreated 1.7 percent to close at 8,835.53. Hong Kong's Hang Seng lost 2.5 percent to 19,369.96 and Australia's S&P/ASX 200 shed 1.5 percent to 4,232.90. Benchmarks in Singapore, India, Indonesia and Thailand were also down.
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