Another Greek tragedy
by Peter Switzer
The correction continues and this time it’s Greeks protesting in Athens that has hit Wall Street very hard overnight. This comes as the Greek Prime Minister has offered to step down to form a national government of unity with the conservative opposition.
The Dow Jones index lost 178.84 points, or 1.48 per cent, to end at 11,897.27 and under the psychologically important 12,000-level.
The S&P 500 shed 22.45 points, or 1.74 per cent, to finish at 1265.42.
The local market won’t ignore this negative reaction to the Greek protests but why do cranky Greeks move global stock markets so aggressively?
Well, it works this way: if Greece defaults it will hit the balance sheets of some of the biggest banking names in Europe — BNP Paribas, Crédit Agricole and Société Générale — as they have lent loads of money to the Greeks.
This in turn could breed inter-bank suspicion, which we saw in the GFC, which could lead to a credit squeeze.
The fear factor is so significant that our dollar has fallen a couple of cents to 105.63 US cents, the euro has lost two per cent and the greenback has resumed its safe haven status!
The likes of BHP Billiton was down over three per cent overnight and oil has slipped four dollars to around $US94 a barrel.
Greece now has unemployment at 16.2 per cent and has the worst debt-rating in the world for any country at Caa1.
The pressure is now on the EU and the IMF to deal with the debt black cloud hanging over the world economy and global markets.
This Greek tragedy has been going for too long and a solution is long overdue.
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Published on: Thursday, June 16, 2011
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