European leaders and financial markets braced for Greece exit from euro

Guardian
May 14, 2012

Financial markets are hastily making preparations for a Greek exit from the euro after a day of political and economic turmoil ended with Europe's policy elite admitting for the first time that it may prove impossible to keep the single currency intact.

With attempts in Athens to form a government after last week's election looking increasingly doomed, European leaders abandoned their taboo on talking about the possibility that Greece might have to leave the euro.

Shares, oil, and the euro were all sold heavily on Monday in anticipation that anti-austerity parties would garner increased support in a second Greek election likely to be held next month, bringing the row between Greece and its European creditors to a climax.

Amid claims in the markets that politicians in Athens were playing a dangerous game of bluff, a potential schism in the monetary union saw borrowing costs for Spain and Italy rise over fears that contagion could spread from Greece through southern Europe. The City's FTSE 100 Index lost almost 2% of its value, dropping more than 100 points, and there were big falls in share prices in Paris, Frankfurt, Madrid and Athens.

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