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Eurozone debt crisis: Markets dive on Greek referendum | |
(40 minutes later) | |
European markets have fallen following Monday's announcement of a Greek referendum on the latest aid package to solve its debt crisis. | European markets have fallen following Monday's announcement of a Greek referendum on the latest aid package to solve its debt crisis. |
Eurozone leaders agreed a 50% debt write-off for Greece last week as well as strengthening Europe's bailout fund. | |
But the announcement of a referendum has cast doubt on whether the deal will be able to go ahead. | But the announcement of a referendum has cast doubt on whether the deal will be able to go ahead. |
The FTSE 100 in London traded 2.1% lower, the Dax in Frankfurt fell 3.5% and the Cac-40 in Paris dropped 3.2%. | |
Earlier, the Nikkei in Tokyo closed down 1.7% and the Hang Seng in Hong Kong closed down 2.5%. | Earlier, the Nikkei in Tokyo closed down 1.7% and the Hang Seng in Hong Kong closed down 2.5%. |
Europe's main share markets had all fallen before the Greek announcement as well, with the FTSE, Dax and Cac-40 all dropping about 3% on Monday. | Europe's main share markets had all fallen before the Greek announcement as well, with the FTSE, Dax and Cac-40 all dropping about 3% on Monday. |
Opinion polls in Greece suggest that most people do not support the deal. | |
Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros through a series of measures including public sector pay cuts, tax rises and falling pensions. | Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros through a series of measures including public sector pay cuts, tax rises and falling pensions. |
"By definition, resistance to the bailout package... would imply a preference to find another route and the only other viable route would be an exit" from the euro, said Padhraic Garvey, an analyst at ING. | |
There is also concern that the referendum would be unlikely to take place before January, which would create months of uncertainty for the markets. | |
"We cannot wait until 15 January," said Konstantinos Michalos, president of the Athens Chamber of Commerce. | "We cannot wait until 15 January," said Konstantinos Michalos, president of the Athens Chamber of Commerce. |
"Personally I do not think we will ever get there." | "Personally I do not think we will ever get there." |
A senior member of Chancellor Angela Merkel's coalition in Germany said he had been irritated by the referendum announcement. | A senior member of Chancellor Angela Merkel's coalition in Germany said he had been irritated by the referendum announcement. |
"The prime minister had [agreed] to a rescue package that benefited his country," Rainer Bruederle told Deutschlandfunk radio. | "The prime minister had [agreed] to a rescue package that benefited his country," Rainer Bruederle told Deutschlandfunk radio. |
"Other countries are making considerable sacrifices for decades of mismanagement and poor leadership in Greece." | "Other countries are making considerable sacrifices for decades of mismanagement and poor leadership in Greece." |
He added that the only thing to do now would be to prepare for the Greek state to be insolvent and try to limit the damage to Europe's banking system. | He added that the only thing to do now would be to prepare for the Greek state to be insolvent and try to limit the damage to Europe's banking system. |
On the markets, shares in banks saw the biggest falls, with Credit Agricole down 8.6%, Societe Generale falling 10.4%, BNP Paribas down 8.6% and Barclays 7.7% lower. | |
On the currency markets, the euro fell 1% against the US dollar and 0.4% against the pound. | |
Greek opposition parties have called for early elections. The conservative opposition accused Mr Papandreou of acting dangerously. | |
A confidence vote is due to take place in the Greek parliament on Friday. | |
Mr Papandreou has 153 deputies in the 300 seat parliament, but has faced increasing dissent within his own party as well as through demonstrations across the country, some of them violent. |