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Europeans spooked by spectre of Greek default

Europeans spooked by spectre of Greek default
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In France, the concerns are there in black and white on the front pages of the newspapers for everyone to read.

“France’s banks trapped by Greek debt,” said one.

French banks are profoundly exposed to Greece’s debt – and there is real fear about the consequences of a possible default.

Prompted by these worries, shares were sharply lower in early trading. Uncertainty is a daily reality for traders. Some say Greece leaving the euro is no longer out of the question.

“As of Monday, the idea of letting Greece go is no longer taboo” remarked one, “but no one knows how that might come about, as there is no provision in the Maastricht Treaty allowing for a country to leave the euro.”

There is also more pressure on Angela Merkel from Finland, which now warns it may opt out of Greece’s second bailout deal if its demand for collateral in exchange for loans to Athens is not met.

“I think all of us want to and will find a way forward that is acceptable to all partners but also answers the concerns voiced by Finland. We have experts working on it,” Merkel told a press conference.

The concern is that Greece will not be able to manage its debt – and the signs from Athens are not encouraging. On Tuesday, striking taxi drivers took their protest to the parliament building in the capital.

Prime Minister George Papandreou will have a conference call with Angela Merkel and Nicolas Sarkozy on Wednesday in a bid to calm the fears.