World markets fall amid Greece’s political uncertainty
World markets are down as Greece’s continuing political uncertainty undermines confidence.
Greece failed to form a coalition government through talks on Sunday and will continue discussions with political leaders on Monday evening.
Bank shares are worst hit, particularly in Spain and France, with Madrid’s IBEX index down 3% and the CAC down 2.7%.
The Dow Jones has opened 1% lower while London’s 100 share index is down 2%.
Germany’s DAX is down 2.5%.
The undermining factor is again the future of the eurozone.
Eurozone finance ministers are meeting in Brussels to discuss the situation in Greece and Spain.
Irish Finance Minister Michael Noonan expressed his support for Greece’s place within the eurozone: “We are not planning a Greek exit, that’s not our business.
“My view is that Greece should continue to stay in the euro, and any support I can give them at the meetings over the next two days to achieve that objective I will do so.”
But he warned that any new Greek government must stick to the austerity plan already agreed.
French banks were among the biggest fallers as investors worried about their exposure to other troubled eurozone countries.
Losses worsened throughout the session leaving BNP Paribas, Societe Generale and Credit Agricole down almost 5%.
Spain’s Banco Santander was also down almost 5% while part-nationalized Bankia lost more than 9%.
They said they would set aside an extra 2.7 billion Euros and 2.1 billion Euros respectively to meet new government requirements aimed at cleaning up the country’s ailing property market.
The price of oil also fell on fears about weakening economic activity.
Brent crude fell $1.69 to $110.57 a barrel. In March, it was $128 a barrel.
US crude fell $1.86 to $94.27.
Meanwhile, both Spain and Italy carried out successful bond auctions on Monday.
Appetite for Spanish and Italian debt was more than strong enough, but the return demanded by investors in Spain’s debt was higher than in previous auctions, reflecting a dip in confidence.
Spain sold 2.9 billion Euros in short-term debt, paying 2.985%, up from 2.623% last time.
The difference in the rate demanded by Spanish 10-year bond investors over the equivalent German bunds hit 4.83%, its highest level since the creation of the euro.
The yield, or interest rate, on Spain’s key 10-year bonds, which are traded on the market, jumped 23 basis points to a record high of 6.22%.
Italy raised 5.25 billion Euros, paying a yield of 3.91%, almost unchanged on the previous rate of 3.89%.
Greece’s lack of a government puts in doubt its ability to stick to austerity measures imposed as part of its financial bailout. Without holding to agreed cuts it will not get the rest of the support funds it needs to function.
Adding to the lack of clarity is the fact that anti-bailout parties did well in the elections.
Anti-austerity feeling may be growing in Germany too after Chancellor Angela Merkel’s party suffered a defeat on Sunday in an election in North Rhine-Westphalia, the country’s most populous state.
On top of that, new French President Francois Hollande won his place after promising to focus more on growth rather than austerity, raising concerns as to whether he will be able to work as closely with Angela Merkel as his predecessor Nicolas Sarkozy did.
The two were the driving force behind the eurozone’s fiscal compact.
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