Shares tumble on fears over Greek default

Speculation is growing that Greece is sliding towards the eurozone exit World stock markets fell on Monday as the growing prospect of a Greek default sent banking shares tumbling across Europe. The escalating financial crisis wiped 144 points off the FTSE 100, sending the index of blue-chip stocks down 2.6% to 5,071 at one stage. There were heavier losses in other European markets, with Germany’s DAX index falling more than 3% to its lowest level since July 2009. France’s three biggest banks all plunged by more than 10%, after senior German politicians appeared to accept that Greece may be forced to quit the eurozone. Speculation swept the City that Greece is sliding towards the eurozone exit, despite imposing a new property tax in an attempt to keep its fiscal plans on track. “Eurozone officials have appeared to be taking a hardline stance on Greek in recent sessions suggesting that the country may not see the next tranche of its bailout funds without more austerity, said Jane Foley of Rabobank. “The hardline position being taken against Greece has fed speculation that perhaps Germany is preparing for a Greek exit from the eurozone. Reports that Germany is increasingly focusing on ways to protect its banks in the event of a Greek default are circulating.” The prospect of Greece exiting the eurozone were fuelled by a senior member of Angela Merkel’s German government openly discussing the prospect that Athens might not receive its next slice of bailout cash. “The situation is very serious, more than some had thought,” said Peter Altmaier. “Exclusion from the eurozone is not legally possible at the moment. That means the Greeks must decide themselves if they stay in the eurozone or if an exit is better for them.” Lehman collapse could be repeated Amid the uncertainty, the euro fell to $1.36 against the dollar and hit a 10-year low against the Japanese yen. The major Asian stock markets all fell into the red, with the Nikkei falling 2.3% and Hong Kong’s Hang Seng index losing 4.2%. Traders were disheartened that last weekend’s meeting of G7 finance ministers did not produce a detailed new plan to solve the European debt crisis . This helped to push the cost of insuring debt issued by Italy to a new all-time high. According to Markit, it now costs over €500,000 (£427,000) a year to insure €10m of Italian sovereign debt, a euro-era record. Credit ratings agency Moody’s is rumoured to be planning to cut the French banking sector’s credit rating, due to its exposure to Greek debt. In Paris, BNP Paribas’s shares fell 12%, with Société Générale losing 11.7% and Credit Agricole down 11.1%. The heavy falls came despite SocGen pledging to sell €4bn of assets to strengthen its balance sheet. “These fears are likely to manifest themselves in the form of further strains within the whole European banking system, as banks remain reluctant to lend to each other in a possible repeat of the 2008 Lehman crisis,” warned Michael Hewson, market analyst at CMC Markets. UK government debt remained a “safe haven” on Monday, with the yield – or interest rate – on 10-year sovereign debt dropping to 2.21%. European debt crisis European banks Greece Europe Stock markets Market turmoil Global economy Europe Graeme Wearden guardian.co.uk

Posted by on September 12, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.