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May 03, 2010

Worries About Greek Economy Send Stocks Reeling

Investor concerns about the debt crisis in Greece hurt stock markets in Europe and the United States on Tuesday.

Major European stock indexes dropped three percent or more, key U.S. indexes were off between two and three percent, while Spanish stocks fell more than five percent and Greek share prices plunged more than six percent.  

The market slide came as Greek workers began a two-day strike in Athens to protest planned government budget cuts.  The European Union and the International Monetary Fund are demanding severe spending cuts by Athens in exchange for a $146 billion bailout of the debt-ridden country.

German Finance Minister Wolfgang Schaeuble told a German newspaper Tuesday that some $30 billion in German funding for the bailout would be stopped if Greece fails to comply with the austerity measures.

Thousands of civil servants and pensioners took to the streets of Athens Tuesday, lashing out at the  proposed budget cuts.  Some demonstrators threw rocks and bottles at police who responded with tear gas.

Greek communists hung a giant banner from the Acropolis, with the phrase "Peoples of Europe Rise Up" in both Greek and English.

Greek lawmakers are expected to vote on $40 billion in budget cuts as early as Thursday.  The legislation will include pay cuts, lower pension payments and higher taxes on tobacco and alcohol.

The protests have already affected operations at Greece's two main airports, which were forced to cancel some domestic flights.   

Politicians and investors are worried that economic problems could spread throughout the EU if Greece fails to make a scheduled debt repayment due May 19.  Those concerns grew in the past week when a key credit rating agency, Standard and Poor's, downgraded its credit ratings for Greece, Portugal and Spain.