Saturday

22nd Jan 2022

Global markets tumble as IMF warns on Greek contagion

Global markets tumbled on Tuesday (4 may) as fears over the eurozone's debt crisis prompted a mass sell-off by investors.

The euro fell to a one-year low against the dollar and the FTSE Eurofirst 300 index closed down three percent, with IMF director general Dominique Strauss-Kahn warning against the risk of contagion spreading from the embattled Greek economy.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • 'There is always a risk [of contagion spreading],' said Mr Strauss-Kahn (Photo: Katrina.Tuliao)

"There is always a risk [of contagion spreading]," said Mr Strauss-Kahn in an interview published in Wednesday's (5 May) edition of Le Parisien. "Everyone must remain extremely vigilant."

The head of the Washington-based lending organisation noted that Portugal had already begun to take additional measures to reduce its deficit however, and said countries such as France and Germany were in a much stronger position.

Greek, Portuguese and Spanish bonds also suffered losses on Tuesday, with Spanish Prime Minister Jose Luis Rodriguez Zapatero forced to deny his government was seeking an aid package similar to that recently granted to Greece.

The Socialist politician brushed off market rumours that Spain was in the process of negotiating a €280 billion rescue package as "complete insanity," with a spokesman for the IMF also saying the reports are unfounded.

Greece's debt crisis has meanwhile affected emerging markets across the Atlantic, as investors dumped riskier assets and sought safe-haven in the US dollar. Mexico's peso slumped to a five-week low. Argentine bonds and stocks also declined.

Opposition mounting in Europe

In Europe there were signs that opposition is mounting to Greece's €110 billion three-year loan, recently agreed by euro area finance ministers and the IMF.

Greek citizens took to the streets on Tuesday to protest against the harsh package of austerity measures that will accompany the aid, with the country expected to grind to a halt on Wednesday as transport workers join the 48-hour strike.

In Athens, the Greek parliament is due to vote on the list of spending cuts and tax hikes later this week, as the government scrambles to show European partners and investors that it is capable of reducing its deficit to below three percent of GDP by 2014, after recent EU data showed it hit 13.6 percent in 2009.

The Dutch parliament is set to debate legislation paving the way for its contribution to the Greek loan on Wednesday, with Berlin hoping to seek similar approval on Friday.

However a group of German professors say they will file a lawsuit with the constitutional court if parliament passes legislation enabling Berlin to transfer its €22.4 billion share of the Greek bail-out.

Opposition has also surfaced in Slovakia, where a majority of political parties are against helping Athens.

Meanwhile, Slovenia has indicated it will need to take out a special loan of its own in order to help its debt-ridden European partner. "Slovenia will gather the resources needed through a bond issue or a loan on the international market and lend it to Greece at a one-percent-higher interest rate," the country's finance minister, Franc Krizanic, told national television.

Covid variants put Schengen under pressure

The EU Commission also raised concerns about the proportionality of Belgium's ban on non-essential travel, for people wishing to leave the country.

Luxembourg tax scandal may prompt EU action

An investigation into Luxembourg's tax regime has uncovered how the Italian mafia, the Russian underworld, and billionaires attempt to stash away their wealth. The European Commission has put itself on standby amid suggestions changes to EU law may be needed.

Investigation

Portugal vs Germany clash on EU corporate tax avoidance

Portugal's taking over the EU presidency puts the tax transparency law for corporations - which has been fought over for years - to a vote in the Council of Ministers. The resistance of the German government has failed.

News in Brief

  1. 'No embargo' on meetings with Putin, EU says
  2. Austria to fine unvaccinated people €3,600
  3. MEP: Airlines should start paying for CO2 sooner
  4. Twitter forced to disclose what it does to tackle hate speech
  5. EU watchdog calls for ban on political microtargeting
  6. MEPs adopt position on Digital Service Act
  7. Blinken delivers stark warning to Russia in Berlin
  8. Hungary's Orbán to discuss nuclear project with Putin

Opinion

Europe must plot its own course on China

Given China's size and interconnectedness with Europe, a strategic policy of non-engagement hardly deserves the label "strategic".

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Latest News

  1. Lawyers threaten action over new EU gas and nuclear rules
  2. MEPs urge inclusion of abortion rights in EU charter
  3. EU orders Poland to pay €70m in fines
  4. Dutch mayors protest strict lockdown measures
  5. Macron promises strong EU borders
  6. MEPs to crackdown on digital 'Wild West'
  7. Macron calls for new security order and talks with Russia
  8. Macron's vision will hit EU Council veto buffers

Join EUobserver

Support quality EU news

Join us