Greek crisis hits climax after Wall Street panic

7th May 2010, Comments 0 comments

Europe's mounting debt troubles and a shock plunge on Wall Street left markets in disarray on Friday, as European leaders rushed to approve a 110-billion-euro bailout for Greece to avoid a default.

Finance ministers from the Group of Seven (G7) top industrialised countries agreed to hold a conference call later on Friday after stock market plunges in Europe and Asia in the wake of a tumultuous trading session in New York.

The market mayhem added to the pressure on leaders of the 16 euro nations meeting in Brussels to map out ways to keep Europe's public finances in check and prevent the Greek debt crisis from spreading to other countries.

"Greek crisis becomes global," read the title of an analysis report by Germany's Commerzbank, adding: "Market uncertainty is increasing further."

The report also said that a European Central Bank meeting on Thursday had failed to calm investors worried about "contagion" from the Greek mess.

German Chancellor Angela Merkel and French President Nicolas Sarkozy issued a joint statement ahead of the Brussels talks calling for a new "robust framework" for policing public finances and protecting the euro.

Japanese Prime Minister Yukio Hatoyama said he was "very concerned" as stocks in Tokyo plunged 3.10 percent and Australian Prime Minister Kevin Rudd said he was watching developments in Greece with "considerable concern."

Commenting on the package of emergency loans for Greece from its euro partners and the IMF, which is to receive a final approval at the Brussels summit, Rudd said: "Markets have judged those arrangements to be inadequate."

As the bailout -- an unprecedented rescue for a eurozone member state -- looms, German lawmakers gave their approval for Berlin's 22.4-billion-euro (28.2-billion-dollar) contribution in a controversial parliament vote.

"We must defend the stability of the common European currency. That is what this is all about," Finance Minister Wolfgang Schaeuble said in the lower house parliament in a debate before the vote.

"And at the same time we are defending the European Union. That is the decision we are taking today, in a time of great uncertainty among people and on financial markets, not just in Europe."

German mass-circulation daily Bild has dubbed the aid "the fattest cheque in history" and the bailout could hurt Merkel's governing coalition because of an upcoming legislative election in North Rhine Westphalia on Sunday.

Opinion polls show a majority of Germans are opposed to the rescue.

Italy also gave the go-ahead for the loans, with the government adopting a law decree that should unlock 5.6 billion euros for Greece pending a vote in parliament within 60 days.

"The objective of the Italian government is that of reaching a common decision agreed upon by all, to put Europe in the best conditions to face the crisis," the government said in a statement.

Meanwhile US authorities have launched an inquiry after Wall Street's blue-chip Dow Jones Industrial Average plunged almost nine percent on Thursday, sparking panic before the index recovered to close down three percent.

Rumours swirled that the plunge was caused by a trader's mistake but after three days in which stocks have suffered steep losses because of concern about Greece's debt crisis, it was clear the sell-off was real for some investors.

"Speculators have been testing the resolve of policymakers," said Kathy Lien, director of currency research at Global Forex Trading, who said the market action evoked the situation in the 2008 crisis.


© 2010 AFP

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