Apr 28, 2010
Debt crisis hits Portugal
<!--background story, collapse if none--> Fears of Greek spiral
*One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral - including Europe's fifth-largest, Spain.
* The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.
It has also disrupted cooperation between eurozone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.
*Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.
* Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money to make the 8.5 billion euro bond payments due on May 19. Even if it does, Greece faces years of austerity with living standards sharply reduced. Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.
* The crisis has highlighted the eurozone's inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted, and EU officials are talking about ways to strengthen them. -- AP
Major European exchanges fell more than 2.5 per cent, and on Wall Street, the Dow Jones industrial average finished down 213 points, or 1.9 per cent. -- PHOTO: REUTERS
ATHENS - GREECE was pushed to the brink of a financial abyss and started dragging another eurozone country - Portugal - down with it, fuelling fears of a continent-wide debt meltdown. Stocks around the world tanked after ratings agency Standard & Poor's on Tuesday downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece's financial contagion is spreading.
Major European exchanges fell more than 2.5 per cent, and on Wall Street, the Dow Jones industrial average finished down 213 points, or 1.9 per cent. The euro slid more than 1 per cent to nearly an eight-month low. Renewed worries about Greece's debt problems spread to Asia Wednesday, sending stock markets broadly lower following sharp declines in the U.S. and Europe.
Japan's Nikkei 225 stock average led the region-wide retreat with a 2.5 per cent fall to 10,935.99. Hong Kong's Hang Seng index shed 1.9 per cent to 20,853.83, while South Korea's Kospi lost 1.5 per cent to 1,723.76. All other major Asian benchmarks were down more than 1 per cent and oil slid below $83 a barrel. 'We have the makings of a market crisis here,' said Neil Mackinnon, global macro strategist at VTB Capital.
Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a 45 billion euro (S$82 billion) rescue package, but it hasn't worked. Standard & Poor's warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone. -- AP
Debt crisis hits Portugal
<!--background story, collapse if none--> Fears of Greek spiral
*One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral - including Europe's fifth-largest, Spain.
* The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.
It has also disrupted cooperation between eurozone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.
*Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.
* Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money to make the 8.5 billion euro bond payments due on May 19. Even if it does, Greece faces years of austerity with living standards sharply reduced. Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.
* The crisis has highlighted the eurozone's inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted, and EU officials are talking about ways to strengthen them. -- AP
Major European exchanges fell more than 2.5 per cent, and on Wall Street, the Dow Jones industrial average finished down 213 points, or 1.9 per cent. -- PHOTO: REUTERS
ATHENS - GREECE was pushed to the brink of a financial abyss and started dragging another eurozone country - Portugal - down with it, fuelling fears of a continent-wide debt meltdown. Stocks around the world tanked after ratings agency Standard & Poor's on Tuesday downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece's financial contagion is spreading.
Major European exchanges fell more than 2.5 per cent, and on Wall Street, the Dow Jones industrial average finished down 213 points, or 1.9 per cent. The euro slid more than 1 per cent to nearly an eight-month low. Renewed worries about Greece's debt problems spread to Asia Wednesday, sending stock markets broadly lower following sharp declines in the U.S. and Europe.
Japan's Nikkei 225 stock average led the region-wide retreat with a 2.5 per cent fall to 10,935.99. Hong Kong's Hang Seng index shed 1.9 per cent to 20,853.83, while South Korea's Kospi lost 1.5 per cent to 1,723.76. All other major Asian benchmarks were down more than 1 per cent and oil slid below $83 a barrel. 'We have the makings of a market crisis here,' said Neil Mackinnon, global macro strategist at VTB Capital.
Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a 45 billion euro (S$82 billion) rescue package, but it hasn't worked. Standard & Poor's warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone. -- AP
