Europe facing ‘Lehman moment’ as Greek crisis unravels
The European Union’s failure to contain the Greek debt crisis is sending fresh shockwaves through currencies, money markets, equities and derivatives.
The euro fell more than two percent in the past two days and the cost of protecting corporate bonds soared to the highest level since January, with credit-default swaps anticipating about a 74 percent chance that Greece won’t pay its debts.
Equities declined around the world, while a measure of fear in fixed-income markets jumped the most since November.
Market moves suggest heightened concern that authorities won’t be able to keep Greece’s debt troubles from spreading after Moody’s Investors Service said it may downgrade BNP Paribas SA and two other big French banks because of their investments in the southern European nation.
The collapse of Lehman Brothers Holdings Inc. in September 2008 caused credit markets worldwide to freeze as investors fled all but the safest government debt.
“The probability of a eurozone Lehman moment is increasing,” Bloomberg news reported Neil Mackinnon, an economist at VTB Capital in London and a former U.K. Treasury official as saying.
“The markets have moved from simply pricing in a high probability of a Greek debt default to looking at a scenario of it becoming disorderly and of contagion spreading to other economies like Portugal, like Ireland, and maybe Spain, Italy and Belgium.”
Lehman’s collapse contributed to US$2 trillion in write-downs and losses at the world’s biggest financial institutions, data compiled by Bloomberg show, and central banks cut interest rates to record lows as economies slipped into recession.
Markets were roiled yesterday as Greek Prime Minister George Papandreou said he would name a new government and call a vote of confidence in Parliament as he seeks to pressure rebel lawmakers to back an austerity plan that would secure a new bailout.
The MSCI World Index fell a further 0.9 percent today.
Papandreou needs to clinch a parliamentary vote on a €78 billion five-year package of budget cuts and asset sales by July to ensure the country receives a new EU aid package to avoid the euro-area’s first default.
“Our duty is to the nation, not to political parties,” Papandreou said in comments televised live on state-run NET TV.
“I will form a new government and immediately afterwards seek a vote of confidence in Parliament. It is a time for responsibility,” he said.
Micheal Bonanno •
@briffy & Mikey. By the way, the Greek disaster was inherited by your political brothers before Papandreou became Prime Minister. So please spare us your lies and for once say the truth or at least a semblance of truth, which is very rare on your part!
Micheal Bonanno •
@briffy and Mikey. Thanks to your precious PN government.
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@HumanTorch prosit nice words so after swiss in the med we will be another greece in the med!!!
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Just like you swallow all Gonzi's trash I guess...sur Briffy!!!!
Its humiliating for a you to keep defending somone who is clearly lying on the death bed and keeps saying...I will survive, I will survive...sakemm jaqta nifsu u jmut.
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Nice words by Papandreou, though not original. Have heard them before umpteen times. Such statements are made for the benefit of the twits who swallow them hook line and sinker.
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“Our duty is to the nation, not to political parties,” Papandreou said ...
A real politician.
...GonziGrifex please take note and resign for the good of this country!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
