Greece shocks markets with referendum on austerity

[garbon]

http://news.yahoo.com/greece-shocks-markets-referendum-austerity-134616084.html

Worries that a planned Greek referendum could scuttle a plan to resolve Europe's debt crisis rattled markets Tuesday morning. The Dow Jones industrial average plunged nearly 200 points, and European stock indexes fell broadly. The dollar and U.S. government bond prices rose as traders moved into assets considered safe.

The Greek government shocked financial markets with news that it would put its unpopular cost-cutting plan to a public vote. If it's defeated, the country could drop the European currency and default on its debt, which would put the European banking system and regional economies at risk of another crisis.

"The Greek referendum puts the connections between European countries at risk, from free-trade agreements to the common currency," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

The Dow Jones industrial average dropped 194 points, or 1.6 percent, to 11,760 as of 11 a.m. The S&P 500 fell 23, or 1.8 percent, to 1,230. The Nasdaq composite fell 49, or 1.8 percent, to 2,635.

Banks fell hard as investors worried about how exposed U.S. banks are to European debt. Citigroup lost 4.5 percent. Morgan Stanley dropped 6.5 percent. JPMorgan Chase & Co. fell 4.2 percent, the largest drop among the 30 stocks in the Dow.

European markets fell ever more. Germany's DAX index fell 4.7 percent and France's CAC-40 fell 4.8 percent.

French banks have large holdings of Greek government bonds and would be exposed to severe losses if Greece goes through a disorderly default on its debt. Societe Generale SA plunged 16 percent in Paris trading and BNP Paribas SA lost 11 percent.

On Monday the U.S. securities firm MF Global Holdings Ltd. became the first big casualty of the European debt crisis on Wall Street. The company, led by former New Jersey Governor Jon Corzine, filed for bankruptcy after concerns about the company's holdings of European government bonds caused its business partners to pull back from the firm and ratings agencies to downgrade its debt.

The yield on the 10-year Treasury note sank to 2.01 percent from 2.16 percent late Monday, a steep drop. Yields fall when bond prices rise. The dollar rose to $1.36 for every euro.

The prime minister of Greece called for the referendum late Monday and the news sent U.S. stocks spiraling lower. The S&P 500 index fell 2.5 percent, which put the broad-market index below where it started the year.

Credit Suisse Group AG fell 9 percent after Switzerland's second-largest bank reported profits that fell short of expectations. The bank also announced plans to cut 1,500 people from its payroll.

The drop came a day after U.S. stocks closed out their best month in nearly 10 years. The Standard & Poor's 500, the most widely used market index, rose 10.8 percent in October, the biggest gain since December 1991.

[crazy canuck]

We have all been screwed by a Greek man.  Even Marti doesn't like that.

[Syt]

"The Greek referendum puts the connections between European countries at risk, from free-trade agreements to the common currency," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

[Caliga]

Would one of you Euro countries please invade Greece and get everyone's money back plz.  I hear the Monastir Gap is lightly defended. 

[Darth Wagtaros]

I nominate Italy. They deserve a chance to do it right this time.

[alfred russel]

I nominate Italy. They deserve a chance to do it right this time.

That would just lead to another German bailout.

[Valmy]

People of Europe!  Rise up and take vengeance on the perfidious Hellenes!

[Caliga]

I nominate Italy. They deserve a chance to do it right this time.

That would just lead to another German bailout.

Yeah.  I think ubermensch are needed for this job, sorry

[KRonn]

This is pretty worrying. Looks like if Greece handles things badly then there will be big financial problems in Europe, which will also hit the US and elsewhere. I heard some talk of near calamitous economic results, especially in some Euro nations that are invested heavily in Greece, if Greece defaults.

[Richard Hakluyt]

This is pretty worrying. Looks like if Greece handles things badly then there will be big financial problems in Europe, which will also hit the US and elsewhere. I heard some talk of near calamitous economic results, especially in some Euro nations that are invested heavily in Greece, if Greece defaults.

..........and yet Greece accounts for just over 2% of the Eurozone economy. So we have an economic system where the tip of the tail wags the dog.

[crazy canuck]

This is pretty worrying. Looks like if Greece handles things badly then there will be big financial problems in Europe, which will also hit the US and elsewhere. I heard some talk of near calamitous economic results, especially in some Euro nations that are invested heavily in Greece, if Greece defaults.

..........and yet Greece accounts for just over 2% of the Eurozone economy. So we have an economic system where the tip of the tail wags the dog.

Which raises the question again of an orderly State bankruptcy if the Greeks reject this plan.  Save the banks that were fool enough to invest in Greek debt and then let the country sink into the Med.

[Maximus]

Looks like a significant portion of the government wasn't onboard with this plan.

[crazy canuck]

Looks like a significant portion of the government wasn't onboard with this plan.

Hope for a palace coup?

[HisMajestyBOB]

I nominate Italy. They deserve a chance to do it right this time.

That would just lead to another German bailout.

Yeah.  I think ubermensch are needed for this job, sorry

No problems like this when the Turks were ruling Greece.

[Maximus]

Hope for a palace coup?

It doesn't seem like we'll be any better off if the government falls.