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European Stocks Stall After Brief Rally

  • VOA News

A European Union flag flies outside the stock exchange in Athens, Greece, May 2012.

A European Union flag flies outside the stock exchange in Athens, Greece, May 2012.

Stocks in Europe gave up their initial gains Monday, failing to continue a rally seen in Asia after pro-bailout parties won enough votes in Greece's parliamentary elections to form a government.

Greece's stock exchange surged more than 7 percent at one point, but lost much of its early gain. Elsewhere in Europe, fears about other struggling economies, especially Spain, erased early advances and stocks closed mixed. Major U.S. stock indexes closed mixed Monday.

Borrowing costs for the Madrid government soared to their highest point since Spain adopted use of the euro 13 years ago. The interest rate on Spanish debt topped 7 percent, the point at which Greece, Ireland and Portugal all were forced to secure international bailouts in the last two years.

Japan's Nikkei index finished the day up nearly 2 percent, and in Hong Kong, the Hang Seng gained 1 percent. Analysts, including Robert Halver at Baader Bank, cautioned that any rally could be short-lived because of the extent of the economic problems in Greece, now in its fifth year of recession.

"We will have, after a short euphoria, the same old crisis because no problem has been solved," he said. "It is still clear that the Greeks will not survive in the eurozone. No private investment will flow into Greece as the danger that Greece will leave the eurozone is still massive, [and] the yield prospects are very low, so Greece is still the focus of the euro crisis and of the financial markets."

Economist Juan Carlos Martinez of the IE Business School, said European leaders must hold to governmental austerity measures, but still promote economic growth.

"No matter how hard Spain tries, and no matter what happens in Greece, a part of the solution for Spain, for Italy, and for some other European countries, is a change on European policies," he said. "It is absolutely necessary to keep the austerity measures, especially in Spain, but it is also absolutely necessary to find some kind of levers or bonds that will allow to combine that austerity with the impulse for growth. Without growth it will be very hard for Spain, no matter what happens in Greece, to get out of the serious situation we are in."

The ongoing turmoil in the 17-nation euro currency bloc has affected markets outside of the continent.

In Afghanistan Sunday, the head of money exchangers in Kabul, Amin Jan Khosti, said traders were swapping euros for dollars to escape the fluctuating situation in Europe.

"Today when I was at the market, people mostly exchanged euro," he said. "They think if today's Greece's turn, maybe tomorrow is Spain and next it will be Portugal's. People think every day their budget deficit is getting deeper."

Khosti also said Afghan businessmen are worried that the euro's ups and downs will damage their trading. Afghans, he added, are already thinking about how the pullout of international troops in 2014 will affect the country's financial situation.

"Because it was Sunday in Europe and we couldn't check the value of the euro online, but when the news about Greece's election and opposition being ahead in the polls reached us, the Euro, which traded 1.26 to dollar, came down to 1.06," he said. "People were trying to exchange euro to dollar."

Some information for this report was provided by AP and Reuters.