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Greek stocks fall 6% on debt fear | Greek stocks fall 6% on debt fear |
(19 minutes later) | |
Falling confidence in Greece's economic policies and ability to pay its debts have seen Greek shares slump 6%. | Falling confidence in Greece's economic policies and ability to pay its debts have seen Greek shares slump 6%. |
The decline came after the Fitch credit rating agency cut Greece's rating to a 10-year low. Greek bond prices also fell as a result. | The decline came after the Fitch credit rating agency cut Greece's rating to a 10-year low. Greek bond prices also fell as a result. |
Fitch's move underscores the fact that Greece's debt is the most expensive to service in the eurozone. | Fitch's move underscores the fact that Greece's debt is the most expensive to service in the eurozone. |
The European Commission urged the Greek government to take "more measures" to reduce its deficit. | |
Greece has the highest debt of the 16-member eurozone - forecast at 125% of gross domestic product next year. | |
Fitch's downgrade follows recent warnings by two other agencies that they were considering such a move. | Fitch's downgrade follows recent warnings by two other agencies that they were considering such a move. |
"A difficult situation in one euro area member state is a matter of common concern for the euro area as a whole," warned outgoing European Union economic and monetary affairs commissioner Joaquin Almunia in a statement. | |
"It is clear that Greece faces very substantial economic and fiscal challenges... but more measures are required." | |
'Asphyxiating stranglehold' | 'Asphyxiating stranglehold' |
On Monday, Jean-Claude Trichet, the president of the European Central Bank (ECB), said the Greek government needed to take "courageous" measures. | |
Greece's Finance Minister George Papaconstantinou has acknowledged growing fears about its ability to pay its debts, fuelled by Dubai's financial problems. | Greece's Finance Minister George Papaconstantinou has acknowledged growing fears about its ability to pay its debts, fuelled by Dubai's financial problems. |
Were it not for the ECB, the Greek government would have been paying a lot more for its debt, and worrying the ratings agencies long before today Stephanie Flanders, BBC economics editor Read Stephanie's blog | Were it not for the ECB, the Greek government would have been paying a lot more for its debt, and worrying the ratings agencies long before today Stephanie Flanders, BBC economics editor Read Stephanie's blog |
Some analysts say Greece could at some point be unable to use its own government debt as collateral for borrowing from the ECB. | Some analysts say Greece could at some point be unable to use its own government debt as collateral for borrowing from the ECB. |
"Greece finds itself in an asphyxiating stranglehold to prod the government to undertake structural reforms and measures to combat tax evasion," said Manos Hatzidakis, an analyst with brokerage firm Pigasos. | "Greece finds itself in an asphyxiating stranglehold to prod the government to undertake structural reforms and measures to combat tax evasion," said Manos Hatzidakis, an analyst with brokerage firm Pigasos. |
The BBC's economics editor Stephanie Flanders said that although there are no formal bail-outs for eurozone economies, Greece has been getting the next best thing to a bail-out, from the ECB. | The BBC's economics editor Stephanie Flanders said that although there are no formal bail-outs for eurozone economies, Greece has been getting the next best thing to a bail-out, from the ECB. |
The financial blow came as the government struggled to settle two days of youth riots. | The financial blow came as the government struggled to settle two days of youth riots. |
They mark the anniversary of the police shooting of a 15-year-old boy last year. That triggered widespread violence also fuelled by anger over the economy. | They mark the anniversary of the police shooting of a 15-year-old boy last year. That triggered widespread violence also fuelled by anger over the economy. |
Governments and companies issue bonds to raise money on the financial markets. | Governments and companies issue bonds to raise money on the financial markets. |
Markets are worried about the vulnerability of government bonds following comments from Dubai's government minister that it would not guarantee troubled property firm Dubai World's debt. | Markets are worried about the vulnerability of government bonds following comments from Dubai's government minister that it would not guarantee troubled property firm Dubai World's debt. |
Other countries seen as weak include the Republic of Ireland, Spain and Portugal. | Other countries seen as weak include the Republic of Ireland, Spain and Portugal. |