EURO FEARS SPARK ROUT IN MARKETS
MARKETS plummeted across Europe yesterday as fears mounted that Greece may leave the Eurozone, driving a mass sell-off as investors fled risky assets.
Shares dropped sharply, while peripheral governments saw borrowing costs jump. European leaders openly acknowledged the prospect of the country leaving the euro, while Greece’s political leaders failed even to meet last night to continue negotiations over forming a government.
German finance minister Wolfgang Schauble said the Eurozone is “ready for every eventuality,” while an EC spokeswoman said “We hope Greece will remain in the euro – but it must respect its commitments.”
Greek stocks led the rout, plummeting 4.56 per cent to a fresh 20-year low.
Worries over Spanish banks also hit markets, as the country’s top five lenders announced plans to set aside an extra €15bn (£11.97bn) in provisions to cover risky property deals, heaping pressure on their finances as the country battles to restore confidence in the industry. Italy was also in the spotlight, after rating agency Moody’s downgraded the long-term debt rating of 26 of the country’s banks, including Unicredit and Intesa Sanpaolo.
As concerns escalated, Spain’s IBEX fell 2.66 per cent, Italy’s FTSE MIB slid 2.74 per cent, France’s CAC declined 2.29 per cent and the German DAX fell 1.94 per cent. The FTSE 100 also joined the collapse, falling 1.97 per cent.
The euro fell 0.55 per cent against the dollar to $1.28, and 0.8 per cent against the pound to 79.81p.
The sell-off also hit peripheral governments’ bonds, while the UK and Germany benefited from their “safe haven” status, attracting investors and pushing down borrowing costs further.
Credit default swaps (CDS) on key European governments leapt, underlining fears over the region, with Spain’s five-year CDS at a record high of 540 basis points, according to Markit.
Meanwhile industrial production in the Eurozone continued to fall in March, official data showed yesterday, demonstrating the impact of ongoing market chaos on the “real economy.”
Eurostat’s data showed output fell 2.2 per cent in the year to March for the area as a whole. Production fell 8.5 per cent in Greece, 7.5 per cent in Spain and 5.8 per cent in Italy. Less high-profile countries also suffered – industrial production dropped 11.3 per cent in Luxembourg and 6.1 per cent in both Estonia and Finland.