Stockmarkets plunge after Greek debt deal referendum announced

The announcement by Greek Prime Minister George Papandreou Monday evening of a confidence vote and a referendum on last week’s European Union deal on Greek debt saw European markets drop sharply after opening on Tuesday. 

Reuters/John Kolesidis

German stocks fell 3.37 per cent, the French CAC 40 plunged 3.68 per cent, Madrid, three per cent, Athens, a massive six per cent and Italy, four per cent. Shares in French banks also took a big hit with Crédit Agricole, BNP and Société Générale losing between 10-12 per cent.

Analysts say the Greek PM’s decision was a “gamble” that had shocked financial markets.

A negative result in either the referendum or the confidence vote would put an end to the EU deal designed to cut Greek debt of over 350 billion euros by around 100 billion euros hammered out by the EU last week.

The move comes as Athens faces delicate negotiations with its eurozone peers on the details of the agreement and with global bankers asked to accept a 50 per cent loss on their Greek debt holdings.

Papandreou, who has 153 deputies in the 300-seat parliament, has faced increasing dissent within his own party over the tougher austerity policy monitored by the EU and International Monetary Fund that has sparked national strikes and widespread protest.

The confidence vote is expected to be held on Friday while the referendum will be held after the details of the EU agreement are worked out – a process expected to reach its conclusion in early 2012.

Crédit Suisse has announced another round of job cuts as the Swiss banking giant continues to feel the effects of the global financial crisis.

• 1,500 jobs to go while bank concentrates on markets in Brazil, China, Russia and Southeast Asia.
• Group hopes to save 656 million euros by 2013 from three per cent reduction of workforce.
• End of July, group announced loss of 2,000 jobs.
• Banks investment banking division posted loss of 155 million francs.
• Asset management division saw profit before taxes plunge 32 per cent.
• Private banking recorded a drop in net profits of 78 per cent from 2010.

RFI/Anthony Terrade