Stock markets across Europe have fallen as a result of the announcement that it is probable that Greece will not meet the targets it has been given to reduce it’s deficit.
It was revealed by Athens that, by the end of the year, its deficit is predicted to be approximately 8.5% of GDP, 0.9% higher than the target given by the EU and IMF. Despite the fact that the figure is an improvement on the 10.5% it stood at last year, and Greece insists that the insufficiency is the result of deepening recession which they cannot do anything about, markets have gone into turmoil amid fears that this is a sign that Greece cannot cope efficiently with its debt levels.
France’s Cac has fallen by 3%, Germany’s Dax by 2.5% and the FTSE 100 by 2%. Similarly, Australian shares closed down 2.7% and US markets opened lower.
The most affected were banking stocks which suffered huge losses due to unease over their vulnerability to Greek debt. The worst fall was that of the bank Dexia which dropped 14%, followed by Germany’s Commerzbank which fell 7.5% and BNP Paribas which was down 6%.
UK banks also suffered falls in shares such as Royal Bank of Scotland which fell 5% and Barclays which dropped 4.7%.
This month, officials from the IMF, EU and ECB are due to come to a decision as to whether Greece has done enough to cuts its spending and therefore qualify for the next instalment of its bailout package worth 8Bn euros. If the next instalment is denied, Greece is highly likely to go bankrupt which could possibly have negative consequences on the global economy.
Regardless of the fact that Greece is taking drastic measures to reduce it’s spending, such as wage cuts and tax increases, the projected deficit for 2012 also fell short of target at 6.8% as opposed to the ideal 6.5%. The economic contraction of 1.7% more than was predicted was held responsible by Greece for the unsatisfactory results.
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