Perilous Times
Panic as World markets crash over eurozone debt
Investor panic hit markets around worldwide as fears grew that
austerity measures facing troubled eurozone countries would derail
recovery and spark social unrest.
By Angela Monaghan
Published: 10:00PM BST 14 May 2010
The Telegraph UK
World markets panic over eurozone on Friday, May 14, 2010
Leading yesterday's falls was the Spanish IBEX 35 Index, which closed
down almost 7pc at 9314.70. The euro tumbled 1.5 cents against the
dollar, dropping to a 19-month low of $1.2358 in US trading.
The sharp drop was a clear signal that the confidence provided by a $1
trillion (£685bn) eurozone rescue package has vanished amid deep
concerns over the situation in Greece, Portugal and Spain, and the
stability of the region as a whole.
Markets were jittery all day but an accelerated sell-off began in late
trading following strongly worded comments from Axel Weber, a senior
policymaker at the European Central Bank and head of Germany's
Bundesbank.
"It is important not to underestimate the dangers to financial
stability that still exist," he said in a speech in Rio de Janeiro.
"The focus of markets has shifted in recent months towards concerns
about the situation of public finances in a number of countries across
the globe."
The FTSE 100 did not escape the panic yesterday, closing down 3.1pc at
5262.85. The French CAC 40 fell 4.6pc to 3560.36, while the German DAX
was down 3.1pc at 6056.71. The US Dow Jones fell 1.51pc to 10620.16.
The moves underlined the fragility of the eurozone rescue package
agreed by finance ministers in the early hours of Monday in attempt to
stamp out the contagion fears triggered by the Greek debt crisis. The
deal was welcomed at the time with a huge sense of relief among
investors, but that gave way as the week progressed to doubts about how
the scheme would work in reality.
Angela Merkel, the German Chancellor, conceded yesterday that Europe
remained in a "very, very serious situation". Investors were further
set on edge by reports that Nicolas Sarkozy, the French President, had
threatened to pull his country out of the single currency if other
eurozone nations did not agree a deal to bail out Greece at a summit in
Brussels last week.
"Sarkozy went as far as banging his fist on the table and threatening
to leave the euro. That obliged Angela Merkel to bend and reach an
agreement," according to a source cited by the Spanish newspaper El
País. Germany denied the report, claiming it was "without any basis".
Greece, Portugal and Spain have been forced to agree tough austerity
measures to address the debt crisis which began in Greece but has since
spread. It has raised fears that growth in the eurozone will be
restricted as the policies are put in place.
There were also fears that violent clashes in Greece – which has been
shaken by two bombs blasts in two days – were just the tip of the
iceberg and could lead to more widespread social unrest as tough
measures are imposed.
Yesterday marked the end of a roller-coaster week for world markets,
which have been extremely volatile as investors reacted to events in
the eurozone. Over the week as a whole, markets were actually up. The
IBEX 35 and FTSE 100 both closed up almost 3pc on the week, while the
DAX rose 6pc on the week, and the CAC 40 was up 5pc.
The weekly gains were down to the sharp rises in stock markets on
Monday, following news of the $1 trillion rescue agreement.