Worries that Greece might default on its mountain of sovereign debt sent global markets steeply downward on Monday, with bank stocks in France leading the plunge.
Bloomberg reported that threats of a Moody’s downgrade this week of BNP Paribas SA, Societe Generale SA and Credit Agricole SA, because of their extensive holdings in Greek debt, punished their stocks; all three plummeted more than 9%. Britain’s banks were not exempt from the rout; Royal Bank of Scotland Group Plc and Barclays Plc lost ground on the recommendation by the British banking commission that the country’s banks firewall their retail lending operations and mount reserves of some 7 billion pounds ($11 billion).
Sunday’s move by Greek Prime Minister George Papandreou to approve still more austerity measures that included a cut of a month’s wages from elected officials and a new tax on property did not bolster confidence. Fears are that Germany and other euro zone countries are prepared not just to let the country default but also to leave the euro zone altogether, as previously reported by AdvisorOne.com. The new two-year property tax, according to Finance Minister Evangelos Venizelos, will be collected through the country’s electric bills so that revenues can be brought in quickly.
Greece has struggled to meet fiscal goals set by the European Central Bank (ECB), the European Union (EU) and the International Monetary Fund (IMF), and at the beginning of the month inspectors from the so-called troika left the country when it became clear that the targets set for the next tranche of Greece’s bailout had not been met.
Venizelos was quoted in the report saying, “We have to do everything we can to emerge from this difficult situation. We cannot give anyone a pretext to say that we are at fault.”