£30bn wiped off Britain’s top firms: Stock markets tumble across the globe amid warnings Greece may abandon the euro

A currency exchange office yesterday in Athens, Greece, on the day that the euro dropped to a nine-year low against the US dollar

More than £30billion was wiped off the value of Britain’s leading companies as world stock markets tumbled yesterday.

The FTSE 100 index fell 130.64 points or 2 per cent to 6417.16 in London, reducing the value of UK blue-chip firms by £33.2billion in a blow to millions of savers.

Milan’s stock market was down 940 points, or 4.92 per cent, and shares in Athens fell 5.63 per cent.

The dramatic sell-off came as fears that Greece will abandon the euro sent shockwaves through the markets…

Europe no longer has to fear the “far right” alone — now there is “far left.”

In Greece, the hard left Syriza is leading in polls for an election this month. The Financial Times reports, “Syriza is seeking a relaxation of austerity and a lightening of Greece’s debt load that would put the country at odds with its international creditors. The chancellor [Merkel of Germany] wants Greece to remain in the eurozone, but does not want to grant debt relief or other concessions sought by Greeks for fear of burdening German taxpayers with the costs.”  

The common Eurozone currency has been a complete failure for Greece.  In the above FT statement, “debt relief” is equivalent to Greece defaulting on their debts.

The entire idea of a common currency among countries varying from Germany to (wildly corrupt) Greece was a fool’s game from the start.  Merkel pretty much runs the Eurozone, with by far the largest economy in the zone (the UK does not use the euro). 

  • Germany appears anxious to see Greece exit the EU. I would suggest they do.

    • mattconan

      I don’t get it- is the fear that a bunch of other nations would follow Greece if it leaves? Greece by itself exiting the Euro would do wonders for the currency’s stability, it seems to me.

      • Frau Katze

        A lot of Greeks want to stay. I followed this carefully the last time. Things might have changed since then. The economy is still in the tank. No reform. It is very hard to undo corruption.

        • Billy Bob Thornton

          It is clear that the austerity programs which I believe Greece is where they began have shown to be abysmal failures. Why don’t the mainstream parties realize that they just take money from the people and just create more debt down the road. It weakens the nation economically and I really don’t see how they benefit the nation in the long term. Remember most Western nations having this austerity program are increasing their debts at huge rates, even claiming at the same time they have an austerity to rein in the debts. Real debt is only really brought down by either defaulting, nationalizing the banks or by backing a currency off of something of intrinsic value. Also, Argentina in 2001 did use bond currencies and that did succeed. By 2006, they were debt-free.

        • mattconan

          Yeah, if they left they’d be a 3rd world country basically in terms of their access to capital markets. I dunno where the answer lies, but if I’m Germany I would cut the cord tomorrow.

          • cgh

            The only problem with that, Matt, is that if Germany does anything like that Merkel will have a huge crowd of French, Italian and Spanish bankers screaming blue murder at her. And a bunch of German banks will likely need bailouts. Relatively few of the European banks meet Basel III reserve requirements.

            In one sense, failing to deal with Greece’s problem and just cutting them loose merely moves the catastrophe from one place to another.

    • dchrist81

      “Rumors have started reaching the press that the Germans will not negotiate with Syriza and that they are ready to let Greece leave the Euro. We have seen this before and we know the outcome: Back in 2011 and 2012 when the fear of Greece leaving the Euro was at its peak (and the threat of Syriza winning the elections was also real), the contagion to other countries, in particular Italy and Spain, forced the Germans (and the ECB) to come to the rescue. A haircut on Greek debt plus the “whatever it takes” statement from Draghi saved the day and ensured that no country left the Euro area.” http://fatasmihov.blogspot.com/2015/01/and-this-is-how-greece-might-leave-euro.html?spref=tw

  • David Murrell

    Some time ago I had read where Greece has had a long history of skipping out of paying government debt — it’s part of their economic culture. If that is the case, it is puzzling why any bank of financial institution would want to buy Greek debt. This is insane. And why was Greece allowed into the EU in the first place?

    • Frau Katze

      You mean you missed the part where they were caught lying about their statistics?

    • cgh

      Indeed it has a long history of been a ne’er-do-well on state finances. That’s why it wanted desperately to join the Euro. It would thus have access to debt financed in Euros at a much lower interest rate than it was entitled. And once it was in, Greece borrowed and spent lavishly.

      Make no mistake, by not taking a hard look at Greece when it applied to join the Euro, the EU and European bankers are as much to blame as the Greeks for this mess. You DON’T give a vodka bottle to a known alcoholic.

  • mauser 98

    who cares? go to readers comments re article

  • cgh

    Matt, it’s about confidence. If Germany is unwilling to bail out Greece, then it’s unwilling to bail out Italy, Spain, France which are in nearly as desperate shape as Greece.

    David, you can find buyers for just about any kind of debt if the interest rate is high enough. And Greece has to pay very high interest rates for debt denominated in Euros because of its existing high debt levels and shaky overall economy.

    As to your other question, Greece was allowed into the Euro (not the EU, that’s another matter entirely) essentially because it lied about the state of its government finances.

    • Ed Ellison

      Absolutely correct on every count.
      First Greece lied about the state of its finances to get into the Euro.
      Then it lied again about its amount of debt to get bailed out.
      The Germans should have cut these shysters loose a long time ago and been done with it.

      • cgh

        Ed, I have limited sympathy for the Germans. During the Kohl government a decade ago, they were the first ones to violate the EU compact over government deficits. That gave everyone else an excuse to be fast and loose with the rules (not that the Greeks needed any encouragement).

        There are two stock remedies for the Greeks dealing with their situation. Withdraw from the Euro, go back to the drachma, which will promptly devalue through the floor. In essence, everyone in Greece takes a massive pay cut by the amount of the devaluation. And since Greece doesn’t actually make very much, the impact on Greeks will be large.

        Second, Greece simply defaults on some or all of its national debt. This is possible only with the first being undertaken. This means of course that no one will loan Greeks anything, and the entire Greek banking system will likely fail. And with the failure of Greek banks, a lot of other banks which have Greek assets could fail as well. Lots of banks bought up Greek bonds as a result of the first round of Greek-EU financial restructuring. A lot of them in the Eurozone are pretty much zombie banks being kept alive only as long as government depositor insurance is maintained. And we saw in Cyprus just what that’s worth.

        The danger here is that both the fascists and the socialists appear to agree on implementing these two solutions, the only difference seems to be in degree.

        • Ed Ellison

          I can’t disagree with your analysis here about what will happen if a Syriza win encourages the Greeks to withdraw from the Euro.
          What boggles my mind is that the average Greek thinks that this will result in the end of austerity for them, and life will suddenly be a whole bunch better.

          • cgh

            Ed, there’s no good ending for the Greeks in any of this. They piled up all this debt, and now they can’t pay it back. They get austerity either from government cutbacks and tax increases, or they get austerity from currency devaluation, bankruptcy and financial isolation. There’s literally no way out of this rat trap for them unless Daddy Warbucks (Germany) pays their bills for them. They are now paying for years of living off the credit card rather than going out and getting a real job.

            It’s no surprise to me that they think this works better for them. People know virtually nothing about finance, particularly government finance. And in desperation, they clutch at increasingly short term palliatives. And in a state of panic, they will increasingly put their trust in all sorts of shysters and snake-oil salesmen.

            In effect, it’s a mob mentality taking over, and mobs are always mindless.

            And again, I have no sympathy for the EU members who will experience all the fallout. They admitted Greece to the Euro on false pretenses and did not get near tough enough with them until far too late.

            Draghi is part of the problem. His policy merely kicks the can down the road, making a bigger pile of debt that has to be dealt with later.

          • Ed Ellison

            “And with the failure of Greek banks, a lot of other banks which have Greek assets could fail as well. Lots of banks bought up Greek bonds as a result of the first round of Greek-EU financial restructuring.”
            This completely explains the EU monetary policy of kicking the can down the road. However can-kicking never does not result in a happy ending. And most Greeks are in for a big shock when their already shaky standard of living takes a nose dive.
            The Greeks and their black market culture should have been run out of the Euro zone a long time ago.

        • Frau Katze

          Yep, you’ve been following it too.

    • Frau Katze

      You beat me to it.

    • mattconan

      That makes sense, but have things gotten better for Greece since their last round of debt forgiveness? Something has to give or nothing will change structurally that will make these countries more economically viable.

  • b_marco

    In other news from Britain (this one’s for you Mamba)


    • I find it hard to dislike Fry. Still, he’s “marrying” someone young enough to be his son. He’s got to know the kid’s only “marrying” him because he’s rich and famous. Is he really okay with that?

      He’s a very self-destructive man. Bipolar (cocaine is very popular with manic-depressives BTW) and suicidal. I don’t see this ending well for him.

      (Julie Burchill may or may not have said that Fry is “a stupid person’s idea of a clever person”.)

      • b_marco

        Oh and in case you hadn’t seen this yet. Ok I should really get some work done now…

    • Frau Katze

      He does not look like much of a prize. Is that a man or woman beside him?

      • b_marco

        .. ya never know these days.

  • simus1

    Greece has a long history of richly corrupt patronage politics being used to buy off its more colourful political extremes and everyone else in general. The bill is usually always shuffled around until Uncle Sugar or Uncle Hans grows bored with the exercise, “pays it for the last time” and departs.
    The real problem is a gridlocked societal structure and a massive socialistic bureaucratic regulation of almost everything which translates into large scale corruption and crony capitalism.
    Perhaps if bankruptcy was declared and it was sold to a hedge fund …………

    • cgh

      Indeed it does. I believe it’s gone through national bankruptcy three times in the past century and a half. The first, if I recall correctly, came from the expenses and consequences of its military adventurism in Turkey in 1920 (which ended about as badly as these things can ever end).

      So the question for the Greeks becomes, “Who’s going to bid me what for this wonderful island in the Aegean?”

      Given how Greece earns its income, it’s not much different than the banana republic of your choice. However it happens, the Greeks are about to get a large drop in standard of living.

      • Frau Katze

        Some islands have already been bought. Gulf oil money.

  • Billy Bob Thornton

    People have to stop making Greece about the failures of socialism when they had a conservative party leading Greece for much of the last 15 years. Almost all the years were governed by the New Democracy party which is a conservative party that is backed by the International Democrat Union which has connections with the Conservative party of Canada, the CDU in Germany and quite frankly every major conservative party in the world. They have a history of terrible economic policies and the only salvation left is a Germany style default. Germany did that after each world war and turned out the be the best nation economically in Europe.

    Some people from the right are even saying are you sure that this Syriza party is far-left when they want out of Europe? They think of Syriza as a freedom party? The truth is freedom is having a nation-state and not being part of the Eurozone.

    The other parties in Greece are for kicking the can down the road and they both PASOK and New Democracy destroyed Greece. And yet they became coalition allies to prevent Syriza, Golden Dawn, Democratic Left and KKE from making it in.

    The problem here is not socialism but fascism. The problems happened under the administration under New Democracy and under the last administration of Papadreou.

    Yes, the mainstream is responsible.

    The only thing to save Europe are the radical parties that are anti-banker and anti-IMF and anti-ECB. Also parties that are anti-free trade. I cannot stress this enough.

  • Pete_Brewster

    Is Frankfurt worried? They should be.

    One more time—if Comrade Erika wants to foreclose on Greece and sell the place to the Saudis to cover German banks’ losses on Greek theft bonds, she should have the good manners to send the German army to collect.

    Or are the German army keeping their powder dry for Dresden?