Fresh fears over Greek eurozone debt

By DOMINIC JEFF
Published on Saturday 11 February 2012 00:00

EUROPEAN markets fell yesterday as a deal on Greek debt unravelled, raising the possibility that the debt-ridden country could imminently default and leave the euro.

An agreement between Greek politicians on a series of cuts that took weeks to negotiate was dashed within hours as European finance ministers demanded even more austerity before releasing the next tranche of bail-out funds.

But with scenes of rioting in Athens and cabinet members resigning in protest at the humiliating terms demanded by the EU, it is far from certain that the Greek parliament will vote through even the original cuts this weekend.

With traders unwilling to go into the break too exposed, London’s FTSE 100 Index fell 43.1 points to 5,852.4, capping its worst week for two months. But the FTSE got off lightly compared with falls of around 1.5 per cent for Germany’s DAX and France’s CAC-40.

Michael Hewson, senior market analyst at CMC Markets, said: “The insistence from EU finance ministers that Greece should go away and look for further savings has seen polarisation amongst politicians, as well as protests on the streets of Athens.

“It also has raised fears that this weekend’s Greek parliamentary vote could result in a vote against austerity and see Greece leave the euro.”

If Greece’s government fails to meet Europe’s demands, the debt-ridden country faces a chaotic debt default next month that would send shockwaves around the world economy.

If it does deliver Europe has committed to give it a €130 billion (£110bn) lifeline that would allow it to pay off bonds maturing in March. The country is also still negotiating on a restructuring of its debt to banks and other private holders.

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