The decision as to whether Greece will receive the next instalment from its bailout fund worth 8Bn euro, which was due to be made on 13 October, has been delayed by eurozone finance ministers.
The cancellation of the meeting follows the announcement made by Greece that it will not meet its end of year deficit cutting target.
Consequently, European shares have fallen significantly with the UK’s FTSE falling by 2.4%, French shares down 3.3% and German shares falling by 3.2%.
Banking shares suffered the biggest falls again as a result of concerns over their involvement with Greek government bonds and subsequent vulnerability to any defaults that might occur.
French banks, which would be worst affected if Greece was to default, suffered the most severe drop in stocks with Societe Generale falling 7%, BNP Paribas losing 6.3% and Credit Agricole down 5.9%.
In addition, Germany’s Commerzbank experienced falls of 5.7% and the UK’s Lloyds Banking Group lost 4.2%.
The cancellation could delay Greece’s receipt of the next loan tranche by another month, which is worrying as it was previously thought that if Greece did not receive the loan by mid October, there was a strong possibility it would default on its debt. However, Jean- Claude Juncker, chairman of Eurogroup, has reassuringly stated that providing Greece receives the next instalment by November, it should manage to avoid defaulting.
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