Ongoing concerns
October 4, 2011
European stock markets continued to slide on Tuesday after eurozone finance ministers meeting in Luxembourg the previous evening put off a decision on releasing the latest tranche of Greece's financial bailout.
Frankfurt's DAX index was down by more than three percent in midday trading on Tuesday, while both the CAC 40 in Paris and London's FTSE 100 were off by more than two percent.
Particularly hard hit was the Franco-Belgian bank Dexia, which lost another fifth of its value, after shedding more than 10 percent on Monday.
This came despite attempts by officials to reassure the markets about the stability of the lender, which is said to be heavily exposed to Greek debt.
Belgian Finance Minister Didier Reynders said early on Tuesday that both Belgium and France would "guarantee" Dexia's solvency, whilst the countries' finance ministers issued a joint statement of support for the lender.
"In the framework of Dexia's restructuring, the governments of France and Belgium in coordination with our central banks, will take all necessary steps to ensure the protection of depositors and creditors," they said.
"To this end, they undertake to guarantee any finance raised by Dexia."
Reynders said, meanwhile: "We have to put all the dangerous parts outside the bank. It is here where the state guarantee will come into play. It's what's called a 'bad bank'."
Decision day postponed
Greece is expected to go into default in November unless it receives the 8-billion-euro ($10.6 billion) bailout installment. Inspectors from the so-called "troika" of the European Union, International Monetary Fund (IMF) and the European Central Bank (ECB) have been in Athens to examine the government's efforts to reduce its deficit. The tranche is only to be released if the inspectors are satisfied that Greece is doing all it can to reduce its debt.
A meeting that had been scheduled for October 13, at which the eurozone finance ministers could have approved the release of the funds, has been cancelled. That date was only set after the troika scrapped its original deadline last month when they determined that Athens had failed to implement its promised reforms.
German Finance Minister Wolfgang Schäuble said he and his colleagues would not be rushed into a hasty decision on the issue.
"We'll wait for the troika's report," Schäuble said. "Then we will take the necessary decision based on that report."
The president of the eurogroup, Luxembourg Prime Minister Jean-Claude Juncker, assured reporters that Greece had the financial means to make it through to November.
'No default discussion'
On Tuesday, Greek Finance Minister Evangelos Venizelos expressed a similar view.
"There is no discussion about a default," Vizelos told a press conference in Athens.
He also said that Greece had agreed to put up 880 million euros worth of bonds in collateral, as demanded by Finland in exchange for its contribution to the bailout.
Monday's talks in Luxembourg came after the Greek Prime Minister George Papandreou's government admitted that it would not reach the deficit-reduction targets set out as part of the bailout package for either 2011 or 2012.
German Economics Minister Philipp Rösler, meanwhile, has said he planned to push for a draft treaty that would see a permanent procedure in place for eurozone states facing default. According to a letter obtained by the Frankfurter Allgemeine Zeitung newspaper, Rösler said the plan would ensure that any default was orderly and that country's unable to bear their debt would undergo a "credible rehabilitation program."
Anger at civil service cuts
Part of his government's latest strategy to help reduce the deficit is a plan to effectively sack almost 30,000 Greek civil servants.
The country's biggest public sector trade union responded to the news by announcing a 24-hour national strike for Wednesday. Among the services to be affected are government ministries and offices, schools and universities. Air traffic controllers also plan to take part in the walkout by completely shutting down Greek airspace for the duration of the strike.
Author: Chuck Penfold (dpa, AFP, Reuters)
Editor: Michael Lawton