Fear stalks the financial markets, with Greece at ground zero

Fear stalks the financial markets, with Greece at ground zero
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Greece is back on the front line of what some fear could be a re-run of the eurozone crisis.

Shares in Athens slumped again on Thursday, though the pace of decline slowed, and the cost of borrowing jumped for the Greek government as it seeks an early exit from its 240 billion euro bailout programme.

Financial markets are sceptical that Greece has recovered enough to do without external aid.

The government is trying to calm the fears, Tasos Anastasatos, Secretary General of the Finance Ministry, told euronews: “Partly this has to do with market worries about political instability, but there are also concerns about the progress of the Greek economy as soon as the present bailout programme ends. The Greek government does not believe those are justified.”

Symela Touchtidou, the euronews Business correspondent in Athens, said: “Market watchers are fearful of a return to the situation we saw in 2010, when the Greek crisis spread through southern Europe. The eurozone has not yet recovered from that debt crisis which led to austerity programmes and record unemployment.”

The amount of interest Athens is having to offer investors to get them to buy Greek government bonds maturing in 10 years time rose on Thursday to around nine percent, way above the other countries that needed bailouts or have weak economies, such as Portugal, Italy and Spain, though their borrowing costs also were up.

But trader Takis Zamanis is not worried. He told us: “I believe that after what’s happened in recent years, the European authorities are much more on alert and ready to act at any time. The ECB was expected to take action in the past two to three months, they have not done that already, but I believe that soon we’ll have central bank intervention that will bring results.”

Two years ago ECB President Mario Draghi helped draw a line under the last eurozone crisis by promising to do whatever it takes to save the euro.

Then he brought down borrowing costs of “peripheral” eurozone countries such as Greece, which had been bailed out by the European Union and IMF, and Spain, which took EU aid to rescue its banks.

Unless the markets calm soon he may now finally have to back his words with actions – by the ECB directly buying government bonds, its ultimate policy weapon for averting a crisis.

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