Chances of Greece leaving the eurozone are growing, as political leaders gather for last-ditch coalition talks in Athens
European stock markets have fallen sharply at the start of trading,
In London, the FTSE 100 has shed 70 points, or 1.2%, to 5503. Every share has lost ground, with banking stock and miners leading the fallers.
Trading screens across Europe are flashing red, with the main indices losing between 1.2% and 1.5%.
The growing prospect of a disorderly Greek default is alarming investors, explained Michael Hewson of CMC Markets, who commented:
Markets continue to feel the pressure and the stakes continue to rise as what was declared unthinkable a year ago or so now, starts to permeate mainstream thinking in Europe.
Political developments in Germany were also alarming traders, with Angela Merkel suffering electoral losses in North Rhineland Westphalia (details here). Hewson added:
These defeats could weaken her hand in trying to pass the fiscal compact through parliament at a time when her insistence on fiscal discipline or austerity comes under attack from around Europe.
The eurozone crisis will be dominated today by talks in Athens and Brussels, while new industrial production data will show the state of the eurozone economy. Spain and Italy must also test investor confidence with bond sales.
Here’s the agenda:
• Eurogroup finance ministers meet in Brussels: from 12.30pm BST / 1.30pm CEST
• Coalition talks resume in Athens: 5.30pm BST / 7.30pm Athens
• Spain sell €2bn-€3bn of 12 and 18-month bonds: from 9.30am BST
• Italy sells €3.5bn-5.25bn of bonds: from 10am BST
• Germany sells €4bn of 6-month bonds
It’s the start of a crucial week. The political crisis in Greece has intensified over the weekend, after attempts to form a unity coalition floundered. Leaders are due to meet again today, but without leftist coalition Syriza — which yesterday refused to join a multi-party government that would stick to Greece’s austerity plans.
If a coalition can’t be formed (as appears likely), Greece heads for new elections in a few weeks.
The talk in the financial markets today is that a Greek exit from the eurozone is now a question of when, rather than if. The prospect of a disorderly default is likely to hit markets again today.
The political vacuum in Greece will dominate the agenda in Brussels later today, where finance ministers from across the eurogroup are meeting.