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Fear of Greek default hurts markets in U.S., Europe

LONDON — Fear that Greece will default on its debt, perhaps triggering a financial chain reaction that will cause another global recession, hurt European stocks Monday and sent American stocks lower for a time.

The market tension came after a German politician suggested Greek finances are so bad the nation might have to leave the coalition of 17 countries that use the euro as their currency.

In addition, the German economy minister published an op-ed arguing that an "orderly bankruptcy" of Greece must be an option. Greece has been relying on international bailouts to keep it solvent.

Germany's opinion on the Greek crisis is taken seriously because Germany has the strongest economy in Europe. A spokesman for Chancellor Angela Merkel played down both suggestions, but financial markets were spooked anyway.

The Stoxx 50 index of blue-chip European stocks fell 2.6 percent. In the United States, the Dow Jones industrial average was down 167 points, or 1.5 percent, before turning around late in the day to close up almost 70.

Investors are worried because a new recession in Europe would hurt the United States because American companies rely on Europe for a big portion of their exports. The American economy is already growing so slowly that it wouldn't take much to push it back into recession.

Kurt Karl, chief U.S. economist at Swiss Re, puts the chances of a chaotic Greek default at only 10 percent.

"European leaders tend to come to a solution before we get to that point," Karl said.

Fear of Greek default hurts markets in U.S., Europe 09/12/11 [Last modified: Tuesday, September 13, 2011 9:51am]
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