George Papandreou Photo: AFP/Getty
Welcome to the FT’s live blog on the eurozone crisis.
Curated by John Aglionby and Orla Ryan on the world news desk with contributions from correspondents around the world.
George Papandreou, the Greek prime minister, caused a major surprise on Monday night and re-opened the eurozone sovereign debt crisis when he announced a public referendum to approve the second bail-out thrashed out last week by European leaders. Public opinion polls show a majority of Greeks oppose the bail-out. The PM will hold an emergency cabinet meeting at 4pm UK time on Tuesday. Parliamentary debate on the proposal starts in Athens on Wednesday. We are wrapping up the live blog for today and will be blogging again tomorrow.
1839: A quick upsum of the day’s key events in Greece and the eurozone:
The Greek prime minister is facing calls to resign after calling a referendum on the EU bail-out plan. An emergency cabinet meeting is taking place on Tuesday evening.
A confidence vote in the Greek government will be held on Friday. Two defections and the threat of a third suggest the ruling Pasok party may lose the vote. This would trigger an early election.
Global markets have fallen sharply, amid fears the deal agreed last week to bail out the eurozone, will flounder. Greek shares tumbled nearly 7 per cent in the biggest drop since October 2008. Italy – viewed by many investors as the crucial country for the fate of the euro – saw the premium it pays to borrow over Germany hit a euro-era record. Silvio Berlusconi has called an emergency meeting of key ministers on Tuesday evening.
France and Germany have said that last week’s deal should be implemented. Mr Papandreou will on Wednesday meet with France and Germany to discuss the crisis ahead of the G20 meeting.
The Dutch Labour party has called the proposed referendum a deal breaker and said it will not support the accords. Without Labour’s support, the Dutch government lacks the votes to push the Greek rescue deal through parliament.
1820: In another surprise move, Panos Beglitis, Greek defence minister, sacked the armed forces chiefs of staff, after an unannounced meeting earlier on Tuesday of the inner cabinet, which takes responsibility for defence decisions. No reason was given, writes the FT’s Kerin Hope in Athens.
1814: Silvio Berlusconi called an emergency meeting of key ministers on Tuesday evening on his return to Rome from Milan, writes the FT’s Guy Dinmore in Rome. Italy’s prime minister said he had earlier spoken to Angela Merkel to assure her of his government’s intention to move ahead quickly in implementing the economic reforms agreed at last week’s eurozone summit.
1811: The decision by Greece to hold a referendum on the eurozone rescue deal was a bombshell for President Nicolas Sarkozy that not only upended final preparations for the Group of 20 meeting in Cannes but also threatened to damage his re-election strategy, writes the FT’s Hugh Carnegy in Paris.
1808: The Greek prime minister’s brinkmanship may prove to be a step too far, writes the FT’s Kerin Hope in Athens. She offers this analysis of his actions:
George Papandreou’s plan to hold a public referendum on the country’s latest bail-out by international lenders is a last-ditch attempt to unify his quarrelling socialist party and defuse mounting pressure to hold a snap election, his supporters say. But it looks now as if the Greek premier’s latest display of brinkmanship may bring down his government, and could even hasten the end of his political career.
1759: President Nicolas Sarkozy said after an emergency meeting of his key ministers that the eurozone plan was “the only way possible to resolve the problem of the Greek debt”.
Consulting the people is always legitimate but there can be no solidarity of all the eurozone countries without each agreeing to make the necessary efforts.
1747: What pushed the prime minister to announce the referendum that has rattled the eurozone and world markets ? An aide to George Papandreou offered Reuters a theory as to his motivation:
This is his final stand. He feels systematically undermined from within so he decided to expose it all to a public discussion
He has decided to take on all sorts of special interests and has declared all-out war
1725: And now the German tabloids have weighed in on the Greek debate. “Everyone is asking why Papandreou is doing this? Why now? Is he messing with us?” the top-selling tabloid Bild said on its website.
1712: The White House says the Greek referendum decision showed the need for Europe to “elaborate further and implement rapidly” a debt rescue package agreed last week. White House press secretary Jay Carney also reiterated in a briefing with reporters that Washington believes Europe has the capacity to deal with its crisis and would do so.
1701: Wobbly legs? Pimco’s Bill Gross tweeted his thoughts on the Greek referendum:
1652: The FTSE 100 Index closed down 2.2%, or 122.7 points ,at 5421.6 after news of the Greek call for a referendum. In Italy, the benchmark FTSE MIB Index lost 1,089.49, or 6.8 per cent, to 14,928.24 at the close of trading in Milan, the largest decline since October 2008.
In terms of the Greek measures, obviously in times of difficult structural adjustment, major fiscal austerity, tough decisions that governments such as the Greek government is contemplating, it is imperative that there is widespread support, broad democratic support for those measures because they will unfold over a period of time. And if this is a judgment of the Greek government that this is the best approach to validate that support, we fully respect that.
1626: Greece’s ASE index of 39 companies fell 55.93 or 6.9 per cent to close at 752.65 in Athens, the biggest retreat since October 2008.
1618: Banks and lenders exposed to Greece continued to take a heavy hit. By 1600 on Tuesday, shares in France’s Societe Generale tumbled 17 per cent and BNP Paribas and Credit Agricole fell 14 and 13 per cent respectively. They are among the most exposed to Greece through sovereign debt holdings and loans. Italy’s Unicredit and Intesa Sanpaolo lost more than 12 per cent and Germany’s Deutsche Bank and Commerzbank lost 8 per cent and 10 per cent respectively.
1609: Plans for a Greek crisis meeting on the margins of the G20 summit in Cannes are starting to take shape. IMF head Christine Lagarde and new ECB president Mario Draghi will take part in a working dinner in Cannes, the Greek prime minister’s office said in a statement, Reuters reported. French president Nicolas Sarkozy, German chancellor Angela Merkel, European Council president Herman Van Rompuy, European Commission president Jose Manuel Barroso and Eurogroup chief Jean-Claude Juncker will be among others attending the dinner, the statement said.
1555: Dismay, surprise, psychological disruption. The FT’s Quentin Peel discusses German reaction to the Greek announcement.
Officials in Berlin made it very clear after the talks between Ms Merkel and Mr Sarkozy that the offer on the table for Greece was “the best offer we can make them”.
“We think, as do the French, that it is more important than ever to swiftly implement the decisions of the summit,” a senior official said.
Although there is some sympathy in Berlin for the political dilemma facing Mr Papandreou, Ms Merkel is understood to be dismayed at not having received any advance warning of the Greek prime minister’s decision.
One official said it “all came as a bit of a surprise. There were no phone calls to Paris or Berlin or any other European capital.”
The worry in Germany is that the uncertainty created will upset the whole timetable of the rescue plans, even if it does not block it for technical or legal reasons. It is seen as “psychologically disruptive”, not least for banks being asked to take a 50 per cent haircut on their Greek bond holdings. “Will they say yes if they don’t know whether Greece will stand by its obligations?” the official said.
1540: Crisis what crisis? Italy enjoyed a public holiday on Tuesday, but now its ministers and bankers are packing up their villas for a meeting on the eurozone crisis. Guy Dinmore reports:
Giulio Tremonti, Italy’s finance minister, has returned to Rome early on the public holiday to prepare for an extraordinary meeting on Wednesday morning of the financial stability committee he chairs, together with Ignazio Visco, new governor of the Bank of Italy, and representatives of the stock market regulators Consob and the insurance sector. Silvio Berlusconi, prime minister, was in his Sardinian villa at the weekend then moved to his Milan residence. A government source said he would also return to Rome later today.
1529: 
And now Greek fears have rattled US stocks. The S&P 500 fell 2 per cent to 1,228.41 in early trade. The Dow Jones Industrial Average declined 212.59 points, or 1.8 percent, to 11,742.42.
1527: Mr Papandreou will attend the G20 summit, his office has confirmed. Will this be his chance to back down from the referendum? Kerin Hope in Athens dissects what his appearance could mean for his premiership.
Here’s a new twist in the Greek political drama: Mr Papandreou’s office has just sent round an SMS saying he’s going to attend tomorrow’s G20 summit in Cannes.
His supporters are breathing huge sighs of relief.
The deus ex machina (the god or goddess who sorted out flawed mortals in ancient Greek theatre) on this occasion seems to have been none other than Angela Merkel, the German chancellor. She called the prime minister earlier today to add weight to President Nicolas Sarkozy’s invitation, say people in the PM’s office.
That gives Mr Papandreou an opportunity to make a face-saving retreat, some analysts are arguing. He can nix the referendum idea, saying the international community put him under pressure and start trying to claw back lost ground with his socialist party. He could even scrape victory at the vote of confidence, though it may be short-lived.
1515: And the latest from the FT’s Richard Milne on how the bond market is holding up:
In among the general market carnage, there are a couple of other spreads to watch in the bond market (aside from the Italian-German one). Italy is now paying more to borrow compared with Spain at any time during the euro era (72 basis points) and France the biggest premium over Germany (122bp). Whichever way you look at it, these aren’t very healthy signs for Rome or Paris.
1512: Now Germany and France are set to convene at an emergency meeting in Cannes to discuss the Greek crisis. Hugh Carnegy reports:
President Nicolas Sarkozy and Chancellor Angela Merkel will meet in Cannes tomorrow, on the eve of the G20, with other European leaders, the IMF and the Greek government to agree “all the measures necessary to put into action” the eurozone rescue package agreed at the Brussels summit on October 27.
A communique after a telephone conference between the French and German leaders said: “France and Germany are determined with their European partners to ensure the implementation without delay of the decisions adopted at the eurozone summit of October 27, which are today more necessary than ever.”
They said France and Germany were convinced that the agreement would permit Greece to return to durable growth. “France and Germany wish, in consultation with their European partners and the IMF, to agree a roadmap as quickly as possible to ensure the application of the accord.”
1459 The Institute of International Finance, the consortium of global financial institutions that represented Greek bondholders in negotiations with eurozone leaders at last week’s EU summit, on Tuesday reaffirmed its commitment to the eurozone bail-out. In a statement, it said:
The IIF today reaffirmed its intention to move ahead with the agreement reached on October 26/27 in Brussels with Euro Area Heads of States and Governments to reduce the nominal private sector holdings of Greek government bonds by 50 per cent. We will work closely with the Greek authorities, Euro Area officials and other relevant parties to agree on, finalize and move toward implementation of the details of the voluntary Private Sector Involvement (PSI) in support of Greece’s reform effort to recover from the current crisis, restore market access and lay the basis for renewed growth
1454 The Greek announcement dramatically raises the stakes for Greece and the eurozone as a whole, Fitch Ratings said. A rejection of the EU-IMF programme, it says, increases the risk of a forced and disorderly default and potentially an exit from the euro:
The announcement of a referendum late Monday underscores the urgency of establishing a credible firewall to prevent contagion from Greece destabilising the eurozone. The uncertainty over whether Greece will accept the EU-IMF programme and PSI also increases the uncertainty around the losses that creditors may incur and hence bank recapitalisation.
In Fitch’s opinion, it is essential that there is rapid progress in making operational the enhanced ‘firepower’ of the EFSF and that the ECB stands ready to intervene in the secondary market to moderate the contagion to solvent but potentially illiquid sovereigns, notably Italy and Spain.
It is highly uncertain what would be the consequences of a no vote. In light of the prolonged and difficult negotiations between the Greek government and the ‘troika’ of the IMF, European Commission and ECB, securing agreement on a new package could prove unobtainable. Given the heavy debt repayment schedule in the first quarter of 2012, without continuing external financial support, a coercive and potentially disorderly sovereign default could follow.
Failure to provide a comprehensive and credible response to the Greek crisis has been a source of contagion and financial instability and has heightened downward pressure on the ratings of other eurozone sovereigns.
1447: Now World Bank president Robert Zoellick has weighed in on the Greek call for a referendum. The call for a vote on a new Greek bail-out plan adds to market uncertainty and if it failed “it would be a mess“.
A G20 summit this week in France should send a “strong signal” that Europe will follow through on plans to overcome its sovereign debt crisis, he said.
The euro zone deal has bought some time and the challenge is how to use the time…It would be very useful if the G20 leaders can send a strong signal on follow through after the euro zone announcement so as to sustain and build confidence
14.35: This afternoon’s Greek cabinet meeting is shaping up as a moment of truth for Mr Papandreou, Kerin Hope reports from Athens.
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“Forget the referendum and even the vote of confidence. The government could crumble tonight,” says one veteran
socialist.
While Mr Papandreou composes his speech to the cabinet, Evangelos Venizelos, his finance minister and deputy premier – and would-be successor – has been on the phone from his hospital bed with the likes of his German counterpart Wolfgang Schäuble and Joseph Ackermann, the Deutsche Bank boss who takes a keen interest in Greek developments.
The governing PanHellenic Socialist Movement’s (Pasok) majority in parliament has already slipped today from four to two seats after two women lawmakers said they would be voting as independents at Friday night’s confidence motion.
And former development minister Vasso Papandreou (no relation to the premier), the self-appointed leader of a dissident socialist faction, said today that Greece needed a government of national unity to push through wrenching economic and social changes in return for the second bail-out package. She’s already asked President Papoulias to set up a meeting of political party leaders to organise it.
Adding to the tension gripping Pasok, six veteran hardliners – all members of the party’s national council – have urged Mr Papandreou to quit and call a snap election. (On that point they’re in full agreement with the conservative opposition).
“The referendum proposal is an act of unprecedented irresponsibility…. and the government’s policies are destroying the country’s productive base… Greece is going back to the 1950s,” the six said in a lengthy letter to the premier.
14.30: Bloomberg is reporting that Mr Papandreou has been invited to the G20 summit in France, according to a Greek government official.
Papandreou, who spoke with German Chancellor Angela Merkel today, is travelling to the meeting at the initiative of France, the official said. Papandreou will speak in the Greek Parliament during a vote of confidence in his government on Nov. 3, said the official.
14.20: Gideon Rachman, the FT’s chief foreign affairs commentator has blogged that Europe’s fear of a Greek referendum is “entirely appropriate” because the Greek referendum would be a hammer blow aimed at the most sensitive spot of the whole European construction – its lack of popular support and legitimacy.
It has been clear for some time that politicians at both ends of the euro-crisis – debtors and creditors, Greeks and Germans – have huge trouble bringing their electorates with them. As the crisis worsens, so voters will become more bitter and disillusioned. Allowing them a direct say, through the ballot box, will be a certain way of ensuring that the deal unravels.
14.10: More bad news alert: Richard Milne, the FT’s capital markets editor reports that the premium Italy pays to borrow over Germany has risen to a fresh euro-era high, leaping over a critical level that can trigger margin payments and that has previously exacerbated crises in Portugal and Ireland.
Italy’s 10-year bond spread to German Bunds hit 454bp, above the 450bp level used by some clearing house, as investors fretted that the latest eurozone deal was coming undone.
That was despite traders reporting that the European Central Bank was heavily purchasing Italian debt on the first day in office of its new president, Mario Draghi, former governor of the Bank of Italy. Nevertheless, Italy’s 10-year bond yields still rose 21bp to 6.34 per cent while Germany’s fell 24bp to 1.79 per cent.
1405 The Spanish government has voiced its dismay at the Greek decision. Victor Mallet in Madrid reports:
“It’s bad news for Spain and for Europe,” said José Blanco, the government’s chief spokesman. Spain, like Italy, is being punished with higher yields in the sovereign bond markets by investors nervous about the possibility of large eurozone economies needing bail-outs several times larger than those already provided for Greece, Ireland and Portugal.
“Everything that might delay a solution to the Greek debt problem is damaging for Spain,” Mr Blanco said in Lugo in Galicia, where he is campaigning for the November 20 general election.
The incumbent Socialist government of José Luis Rodríguez Zapatero, prime minister since 2004, is expected to be heavily defeated in the election by the opposition Popular party, led by Mariano Rajoy.
1351 Ruling party deputy Eva Kaili has called on the PM to step aside. She wants the government to be headed by a person with wide support who can safeguard the bail-out, Bloomberg reports. In a letter to the PM today, she wrote:
A referendum effectively cancels the agreement of Oct 26 and can lead the country to bankruptcy
The letter did not make clear if she would resign her seat or membership of the party, as reported in Kerdos newspaper.
1346 The FT’s markets editor Chris Adams has tweeted on the rush to havens:
1344 The FTSE All-World equity index is down 3.4 per cent, commodity prices are stumbling, while 10-year Treasury yields fall 12 basis points to 2.0 per cent. Wall Street’s S&P 500 has opened with a loss of 2.1 per cent. Now, the Vix index, which measures investors expectations for equity market volatility and which is known as “The Fear Gauge”, is jumping 22 per cent to 37. For the latest on markets around the world, check out the global market overview.
1331 Now more on the mysterious illness of Evangelos Venizelos, the Greek finance minister, which we blogged on at 1225. The story is a bit more complicated than it at first appears, writes Kerin Hope in Athens.
He was rushed to hospital in the early hours of today suffering from stress-related stomach pains, according to people in his office.
Not so, insiders say.
He’s trying to distance himself from Mr Papandreou’s latest political maneouvre – and the possibility it could trigger the government’s collapse.
A ministry flack told Reuters the minister knew nothing about the referendum plan ahead of the announcement. Not very likely, say insiders, since it’s been discussed on and off by high-level socialists for weeks. A diplomatic illness is just the thing to keep
people at bay while Mr Venizelos, who is also deputy prime minister, ponders his next move.
1328 The Greek prime minister’s grip on power appears to be weakening. As we blogged at 1214, Milena Apostolaki is to defect from Papandreou’s socialist Pasok party. At the same time, Kerdos newspaper is reporting that Eva Kaili will also abandon his Pasok party. This leaves the PM with 151 seats in the 300-seat chamber. Six members of the party called on the premier to resign in a joint letter, Athens News Agency said.
1323 Now presidents Barroso and Van Rompuy, the EU’s two top officials, have released a statement on the Greek decision to hold a referendum:
We take note of the intention of the Greek authorities to hold a referendum. We are convinced that this agreement is the best for Greece. We fully trust that Greece will honour the commitments undertaken in relation to the euro area and the international community.
The Presidents of the European Council and Commission have had a telephone conversation with Prime Minister Papandreou. The Presidents are in contact with members of the eurozone and will continue to be in the margins of the G20 meeting in Cannes.
1316 The FT’s markets editor Chris Adams has tweeted on the biggest banking losers on European stock markets today.
1314 The news from Greece has shaken up President Sarkozy’s hopes for the G20 summit in Cannes this week. From Hugh Carnegy in Paris:
The Greek referendum decision caused consternation in Paris where President Nicolas Sarkozy had hoped for a smooth transition from the eurozone summit deal last week to the G20 summit in Cannes starting on Thursday.
His plans for the G20 to reinforce the eurozone rescue plan and allow him to present a united global response to the sovereign debt crisis now look like being disrupted. The return of extreme volatility on financial markets - with the French bourse and French banks particularly hard hit on Tuesday – was the last thing he wanted this week.
The president and German chancellor Angela Merkel quickly arranged a telephone conference to discuss the development. Mr Sarkozy was also due to convene an emergency meeting of key ministers and the governor of the Bank of France later in the day to formulate their reaction.
The announcement also has potentially serious domestic implications for Mr Sarkozy.:
Further instability over the debt crisis is a threat domestically for Mr Sarkozy, who faces re-election in six months time. The French economy is flagging, forcing his centre-right government to prepare a second austerity package within three months to ensure the country stays on target to reduce its budget deficit to 3 per cent by 2013. This is central to controlling France’s public debt, due to reach more than 87 per cent of gross domestic product next year, and thus to preserving France’s triple A sovereign debt rating.
If the uncertainty continues until a possible Greek referendum in January, it will severely disrupt Mr Sarkozy’s re-election campaign plans. He is set to announce officially his candidature in January or February and is anxious to have put the worst of the eurozone crisis behind him before he takes to the hustings. He already lags far behind Francois Hollande, the opposition Socialist candidate, in the polls and will come under strong criticism for his handling of the crisis if it does not abate.
1300 Mr Papandreou’s call for a referendum on Greece’s latest bail-out package is causing havoc on markets and, predictably, has triggered a demand by the opposition for a snap election. But, as Athens’ correspondent Kerin Hope outlines, there are still plenty of hurdles along the way to a vote:
First Mr Papandreou has to win a vote of confidence on Friday night. This is getting harder than it looked last night. The socialists’ parliamentary majority slipped this morning after Milena Apostolaki, a prominent younger socialist lawmaker, announced she was leaving the party to sit as an independent.
And if he wins that vote, he has to secure the approval of Carolos Papoulias, the president for a referendum.
This would be the first such vote since 1974. Mr Papoulias is a socialist, but a cautious one and may counsel the prime minister to think again given the disastrous potential of a “no” vote. And if it does happen, at least 40 per cent of eligible voters have to participate in order to make it legitimate. Given the frustration and anger that’s been expressed in recent street protests – and the low turn-out at last year’s local elections – voters may stay home in droves.
That’s a lot of “ifs”.
1247 Italian bond spreads have reached a fresh euro-era high after last night’s announcement from Athens. In the Italian capital, writes our correspondent Guy Dinmore, there is a strong sense that events have slipped outside of Mr Berlusconi’s control
Italy’s Silvio Berlusconi blamed the “unexpected” Greek referendum decision for falls on markets, saying it raised uncertainties over the EU bail-out plan. His office in Rome said in a statement that the prime minister – last reported to be at his Milan residence – was in close contact with Gianni Letta, cabinet under-secretary, and Giulio Tremonti, finance minister.
The statement made no direct mention of the rising yields on Italian debt and the widening of the spread over German bunds to record highs, but said Mr Berlusconi and ministers were working on “fine-tuning” implementation plans for economic reforms to be presented at the G20 summit. Italy’s government would act with “determination, rigour and speed”, the statement said.
Despite such efforts to regain market confidence there is a strong sense in Rome that events have long since slipped out of Mr Berlusconi’s and Italy’s control, although months of government infighting and procrastination have not helped investors’ nerves either. Newspapers quoted Mr Berlusconi as saying on Monday that the “speculative” attacks against Italy required a global response and were not a result of his government’s action. “The crisis is not my fault,” he was reported as saying in reaction to repeated calls for his resignation by opposition leaders.
1234 If Greece rejects the bail-out, is there a plan B? If only, says Gary Jenkins, head of fixed income at Evolution Securities:
As if the lack of detail in last week’s ‘Grand Plan’ wasn’t enough, the Greek government thought it would add to market concerns by calling a referendum on the second bail-out…if the Greek population votes against, it will leave the IMF and Greece’s European partners in a very difficult situation and seriously increases the risk of an exit from the currency union.
I mean lets be fair, the EU hardly has a Plan A, so if that gets rejected there really isn’t a Plan B to turn to with regard to Greece. They may be able to tweak the agreements here and there, but a whole scale new approach to the Greek problem is very unlikely. It raises the prospect of a disorderly default and an exit from the EU
1231 The Greek prime minister’s decision to call a referendum on the latest bail-out plans has immediate political repercussions for the rest of the eurozone. This from our correspondent Matt Steinglass in Amsterdam:
The Dutch Labour party decided on Monday night that it would not support the multi-pronged eurozone rescue package should it come to a vote in parliament. Labour said that the Greek referendum was a “deal-breaker”.
Its stance means that the centre-right coalition government led by Mark Rutte will not have a parliamentary majority for the accords. The coalition is propped up in parliament by the far-right Party of Freedom led by Geert Wilders which has already made clear it will vote against the eurozone deal. The government has promised to bring all major eurozone initiatives to a vote in parliament but it is not clear when a vote on the new accords will be scheduled.
While it is technically possible for the government to sign off on the agreement without parliamentary support, senior Dutch officials say the likely outcome is that the government would face a motion of no confidence in parliament. The Dutch political fall-out provides another example of how the political opinion in the creditor countries is becoming increasingly hostile to the rescue plans.
12.25
Pity the Greek finance minister. It has emerged that Evangelos Venizelos, who is leading the talks with the EU, the IMF and banks on the bail-out, did not know that the prime minister was going to announce a referendum. A government official told Reuters:
Venizelos had no idea about the referendum. All he knew about was the vote of confidence.
Mr Venizelos has since been admitted to a hospital in Athens with stomach pains. He should remain there until later on Tuesday.
12.14 Further pressure on prime minister George Papandreou. A Greek deputy has defected over his call for a referendum, leaving the governing socialist party with only a two-seat majority in parliament, news agencies report. Milena Apostolaki’s office said on Tuesday she had declared herself an independent deputy in a letter to parliament speaker. The socialists now have 152 seats in the 300-member legislature. The prime minister has called for a confidence vote in his government on Friday.
12.09 Fabio Fois and Julian Callow from Barclays Capital offer this analysis of the Greek move.
The latest political manoeuvring [is] intended to shore up government support for yet further fiscal austerity and major economic liberalisation, at a time when support for the government has been weakening, while stopping short of calling new elections. [It] creates new uncertainty in the eyes of markets, which could be concerned that, should the outcome of the referendum be negative, then either Greece would have to restructure its debt much more aggressively than than the 50% currently envisaged in the programme, or it could even pave the way for an eventual exit from the euro area.
12.o4 European markets have tumbled on news of the referendum. The FTSE Eurofirst 300 index tumbled 3.3 per cent on Tuesday morning and the euro fell 1.1 per cent to $1.3709. At the same time, Italy’s 10-year bond spread rose to 440 basis points, within a whisker of the critical 450bp level that is seen as a trigger for margin payments from clearing houses. Analysts seem to be taking the view that the Greek prime minister will be unlikely to pull off a victory. Benjamin Reitzes, an analyst at BMO Capital Markets, told Associated Press.
Talk about your all-time bonehead moves….It would reintroduce the risk that Greece could face a disorderly default and potentially be forced to leave the euro.
1634: Bank of Canada’s governor Mark Carney offers a rare voice of sympathy for the Greek call for a referendum:
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