NEW YORK (AP) — A wave of selling swept Wall Street and stock markets around the world Tuesday after Greece said it would let the people vote on an unpopular European plan to rescue the Greek economy.
The Dow Jones industrial average fell 224 points, or 1.9 percent, after falling 276 points the day before. The stocks of major banks, including Citigroup and JPMorgan Chase, were hit harder.
Intense selling roiled markets in Europe. The main stock index was down 6.2 percent in Italy, 4.6 percent in France, 4.2 percent in Germany and 2.4 percent in Britain.
The value of the dollar rose, and bond prices rose so dramatically that analysts said they were stunned. Analysts said the bond action reflected fears that the turmoil in Greece would tear at the fabric of Europe’s financial system.
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“The Greek referendum puts the connections between European countries at risk, from free-trade agreements to the common currency,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
The prime minister of Greece said unexpectedly Monday that he would put the European rescue plan to a binding vote, the first referendum to be held in Greece since 1974.
The plan requires banks that hold Greek national bonds to accept 50 percent losses to the Greek economy afloat. It also beefs up a European bailout fund and requires banks to strengthen their financial cushions.
But international creditors have demanded that Greece enact painful tax increases and drastic cuts in public welfare programs, and Greeks have shown their hostility to those measures in violent protests and strikes.
If the European rescue falls through and Greece defaults on its debt, the ripple effect would be global. Europe could fall into recession, hurting a major market for American exports, and banks could severely restrict lending.