Stocks dropped a day after Greek Prime Minister George Papandreou sought to silence his domestic critics by unexpectedly calling for a referendum to vote on the nation’s proposed bailout.
Polls indicate that a majority of Greeks oppose the new austerity measures needed to receive the lifeline agreed upon last week to keep the increasingly troubled European Union member country afloat. Yet a majority also oppose leaving the euro zone.
It’s a gamble that could risk the country’s default if voters reject the EU-sponsored bailout. It might also refuel concern about other fiscally-challenged euro zone nations such as Portugal and Spain.
Surprised by Papandreou’s move, French and German leaders urged him to uphold the terms of the deal. “The plan, designed to aid Greece and stem the wider debt crisis, is “more necessary than ever today,” they said in a joint statement, adding that they “are convinced that this agreement allows Greece to return to lasting growth.”
French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet Wednesday to push for a quick implementation of Greece's new bailout deal ahead of a summit of the G20 major world economies, according to Reuters.
Investors and analysts were far from impressed either.
"This was completely unanticipated ... It is not needed and it is just sort of an internal political thing," John Canally, investment strategist and economist for LPL Financial in Boston, told Reuters. "This vote in Greece is going to hang over the market for next week or so, unfortunately."
In Europe, the Stoxx 600 Index ended the day with a 3.5 percent plunge.
In afternoon trading in New York, the Dow Jones Industrial Average dropped 1.79 percent, the Standard & Poor's 500 Index shed 2.00 percent and the Nasdaq Composite Index lost 2.37 percent.
A Dow Jones Newswires report citing a Greek Socialist Party official saying the referendum is “basically dead” helped Wall Street pare some losses. The damage to investors’ confidence was already done.
The Chicago Board Options Exchange Volatility Index, or so-called investors’ fear gauge, jumped 17.5 percent.
Meanwhile, the Institute of International Finance, the lobby group for more than 450 financial firms which last week reached an accord with the EU for private bondholders to accept a 50 percent cut in the face value of their Greek government debt, pledged support today.
“We will work closely with the Greek authorities, euro-area officials and other relevant parties to agree on, finalise and move toward implementation of the details of the voluntary private-sector involvement,” the IIF said in a statement today, according to Bloomberg.
The greenback strengthened 0.85 percent against a basket of its major counterparts.
Economic data showed the pace of growth in the US manufacturing sector eased in October. Even so, improvement in new orders suggested resiliency in the sector.
(BusinessDesk)
14 Comments
Greece’s astonishing decision to call a referendum – "a supreme act of democracy and of patriotism", in the words of premier George Papandreou – has more or less killed last week’s EU summit deal.
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012986/r…Maybe just the opposite Matt....He knows the burden he would commit them to and his own saftey or indeed the saftey of the entire population at risk ...relieved himself of the burden.
It's strange when politicians decide it's time for demoracy to play a part......fear and loathing in Athens.
I like speigels take on the referrendum.
Especially since it was the biggest concern of the other euro members so far, that Greece "Bye € 'says. The formula for European apocalypse goes like this: first goodbye Greece, Portugal and Spain will fall, and then pulls the monetary union with Italy over the precipice. With luck, there remains a Northern European Euro-Zönchen.
The Biggest Greek CDS Speculator Has Been Uncovered - Culprit Is... Greek State-Controlled Hellenic Post Bank
http://www.zerohedge.com/article/biggest-greek-cds-speculator-has-been-… >>> that was a while back, today we get this rumor
Franken_Stein
.Rumour has it that the state owned TT Hellenic Postbank had bought CDS on Greek bonds themselves.
The Blog coveringdelta.wordpress.com reported, that in the spring of 2009 CDS on Greek bonds worth almost $1 billion were sold from TT Hellenic Postbank to company IJ-Partners, headquartered in Geneva.
The profit for TT Hellenic postbank in that sale was said to be a meagre $35 million, but today's worth of said CDSs amounts to $23 billion, a rise of 2700 %.
One look into the advisory panel of the company "Informed Judgement Partners" reveals the names of the beneficiaries from that deal.
IJ partners is a private company for "High Net Worth Individuals", a kind of private equity company.
Here we find a string of famous Greek people, among them former IMF economist Miranda Xafa and Theodore Margellos, a famous Greek export businessman.
Vice president of IJ Partners is Jose-Maria Figueres, who also serves on the board of an NGO together with none other than Andreas Papandreou, brother of current sitting Greek Primeminister Georgios Papandreou.
Looks like a classical case of insider trading.
We are ruled by criminals.
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