Greek stock market dives after five-week closure

The stock market was closed as part of Greek financial controls. Picture: AFP/Getty Images

The stock market was closed as part of Greek financial controls. Picture: AFP/Getty Images

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Greece’s stock market plunged by more than 22 per cent as it reopened after being closed for five weeks, giving investors their first opportunity since late June to react to the country’s economic crisis.

Bank shares suffered most, hitting or nearing the daily trading limit of a 30 per cent loss.

Evangelos Sioutis, financial analyst and head of equities at Guardian Trust, noted some traders were selling stock merely to raise cash because there was so little liquidity in the Greek economy.

He said: “There’s a sense of panic. There are no buyers. The outlook is not clear.”

Markets in the rest of the world, however, were largely unaffected, a sign that investors outside Greece have now largely cut off ties with the country after years of crisis there.

Greece’s stock market and banks were closed on 29 June, when the government put limits on money withdrawals and transfers to keep a run on the banks from bringing down the financial system. People were panicking over the prospect that the country could fall out of the euro after its talks with creditors broke down.

The Greek government, led by Alexis Tsipras of the left-wing Syriza, has since then resumed talks with creditors and reopened its banks. Strict limits on cash withdrawals remain, however. Two surveys illustrate the extent of the damage on the Greek economy in July from the bank closures, money controls and general uncertainty.

Financial information company Markit said its gauge of manufacturing activity in Greece plummeted during the month to 30.2 points, its lowest ever, despite improvements across the rest of the 19-country eurozone.

“Manufacturing output collapsed in July as the debt crisis came to a head,” Markit economist Phil Smith said.

“Factories faced a record drop in new orders and were often unable to acquire the inputs they needed, particularly from abroad, as bank closures and capital restrictions badly hampered normal business activity.”

Meanwhile, a monthly survey of business and consumer confidence, the Economic Sentiment Indicator, fell for a fifth consecutive month in July to its worst level since October 2012.

“The negative development is the result of the sharp deterioration in business expectations in all areas, but also a recent and significant decline in consumer confidence,” said the Foundation for Economic and Industrial Research, which does the survey.

Greece is currently in intense negotiations with bailout lenders to negotiate the terms of a massive new rescue package in the next two weeks.

The country needs to complete the talks and get more loans before 20 August, when it has to repay more than €3 billion (£2.1bn) to the European Central Bank.

Deputy finance minister Dimitris Mardas did not comment on reports Athens could seek a short-term loan to tide it over in case the talks are extended.

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