EU contagion fright back

As stocks and the euro fell on Thursday, borrowing rates rose for Italy and Spain’s government debt — a sign that investors are worried that the two countries would be dragged back into a crisis that had shown some signs of easing.

In Europe, the FTSE 100 index of leading British shares was down 0.3 per cent at 5,873 while Germany’s DAX fell 0.5 per cent to 6,623. The CAC-40 in France was 0.4 per cent lower at 3,377.

Earlier in Asia, the Bombay Stock Exchange’s Sensitive Index lost 0.3 per cent to 48.42, Tokyo’s benchmark Nikkei 225 index shed 0.2 per cent to 9,238.10, Hong Kong’s Hang Seng was off 0.4 per cent at 21,277.2, Seoul’s Kospi fell 1.4 per cent to 1,997.45 and China’s Shanghai Composite Index lost 0.4 per cent to 2,356.86.

Concern has crept into the markets that Greece could still be forced into a disorderly default on a vital €14.5 billion ($19 billion) bond repayment due next month. Despite answering concerns over its commitment to tough austerity measures, the country has yet to clinch deals with its international creditors for a bailout worth €130 billion ($170 billion) and an accompanying €100 billion ($131 billion) debt writedown agreed with its private bondholders.

Over the past few days, fears have grown that the bailout deal may be unraveling and on Wednesday relations between Greece and its partners in the eurozone hit a new low.

Greek Finance Minister Evangelos Venizolos told the country’s president, Karolos Papoulias, that there were “many in the eurozone who don’t want us any more”.

Meanwhile, Germany’s finance minister, Wolfgang Schaeuble told German Suedwestrundfunk radio on Wednesday: “They must understand in Greece that we want to do everything to help Greece — we see the great distress that people in Greece must bear because the political class in Greece has failed over years and decades, and I am not sure even now whether all in the political parties in Greece are aware of their responsibility for the difficult situation of their country.”

Investors on Thursday appeared less than impressed with the clash between Greece and its European neighbours.

“Yesterday’s [Wednesday’s] back and forth between Greek politicians and EU policymakers had all the hallmarks of an unedifying playground spat, with accusations and insults flying thick and fast,” said Michael Hewson, markets analyst at CMC Markets. —