Europeans Fear Greek Debt Crisis Will
LANDON THOMAS Jr.
Published: April 28, 2010
inches closer to the brink of financial collapse, fear that the debt crisis will spread is
Increasingly, investors wonder if Portugal, Spain and even Ireland may not be able to borrow the
billions of dollars they need to finance their government spending.
,” said Philip Lane, a professor of international
economics at Trinity College in Ireland, referring to the Wall Street failures that propelled the
financial crisis of 2008. “It is not so much the fundamentals as it is the unwillingness of the
market to fund you.”
A major ratings agency cut Greece’s debt to junk level on Tuesday, warning that bondholders
could face losses of up to 50 percent of their holdings in a restructuring. The agency also
downgraded Portugal’s debt by two notches.
Leading stock indexes across Europe plunged by 2.5 to 6 percent, and
fell to a recent
low, for a 13 percent decline against
since December. The Dow Jones industrial
average slumped 213.04 points, to 10,991.99, a fall of 1.9 percent, and markets continued
dropping into Wednesday, with Japan’s Nikkei index falling more than 2 percent.
The downgrades, by
, pushed up the interest rates that Portugal must pay on its
10-year bonds to a high, and Spain’s costs rose, too. Investors are already demanding nearly 10
percent in returns on Greek’s 10-year bonds. The cost of insuring all three countries’ debt against
a default are also at record levels — a clear sign that investors are shunning them.
“The situation is deteriorating rapidly, and it’s not clear who’s in a position to stop the Greeks
from going into a default situation,” said
, president of Yardeni Research. “That
creates a spillover effect.”
The problem is that it is not just Greece, which expects to receive international aid, but Portugal,