Last week as Germany reinforced their short term commitment to a second bailout for Greece, they also voiced their fears that there would eventually be what they referred to as an ‘orderly default’ which sent the bourses tumbling on Monday.
Market data shows that banks were hit hardest. Indicative of this is France’s BNP which was down by 14% on midday Monday. Markets around the globe are following suit with all down by some degree. At midday, London’s FTSE 100 fell 2.3%, Germany’s DAX was down 3.2%, France’s CAC 40 fell 4.2% and Asia was hit as well where Hong Kong saw a fall of 4%.
Amidst all these fears of another widespread European debt crisis that would be spawned by Greece’s default, the euro is at its lowest in ten years against the yen. Reports coming out of the DAX show that investors in Germany are pouring their money into safe havens such as German bonds.
It appears that this latest lack of confidence is based on very real fears that Germany has lost patience with the bailout and may not help in future efforts. The prime minister of Germany went so far as to say that they believe an orderly default couldn’t be ruled out and some within their coalition feel that Greece could even exit the Eurozone.
In addition to concerns over Greece’s ability to recover, there appears to be division amongst officials in the ECB (European Central Bank) as their chief economist suddenly resigned on Friday. This is viewed as a very real indicator of just how extensive the division is amongst leaders in Europe as to what should be done about the debt crisis.
Even though the vice chancellor tried to soften the blow of previous remarks he made to the press by saying Germany does have the goal of stabilising the Eurozone, this had little impact on the market as evidenced by falling numbers across the board.