Make us your home page
Instagram

Downgrades and protests rattle eurozone

Protesters gather at Puerta del Sol square in Madrid on Sunday as demonstrations spread against Spain’s austerity measures and its sky-high jobless rate. Spain’s governing Socialists took a drubbing at regional polls.

PEDRO ARMESTRE/AFP/Getty Images

Protesters gather at Puerta del Sol square in Madrid on Sunday as demonstrations spread against Spain’s austerity measures and its sky-high jobless rate. Spain’s governing Socialists took a drubbing at regional polls.

LONDON — Most of Europe's stock markets ended at least 1 percent lower Monday, with Italy's main exchange falling 3 percent, as fears over the solvency of Greece combined with concerns that Spain, or even Italy, may be dragged into the turmoil that has already seen three euro countries bailed out.

Stocks and the euro tanked on a toxic brew of credit rating downgrades, a heavy electoral defeat for Spain's governing party and disagreements among top European officials on how to deal with the crisis.

"It was a bad weekend for the eurozone and, in particular, for those politicians and financial authorities trying desperately to keep the euro project together," said Jeremy Batstone-Carr, director of private client research at Charles Stanley.

Investors watched aghast last week as top policymakers clashed over how to deal with Greece's mountain of debt.

While policymakers at the European Central Bank warned of the catastrophic effects of a Greek debt restructuring, officials in Brussels suggested a delay in bond repayments could help give Greece more time to regain market trust.

Amid the confusion, Fitch on Friday downgraded Greece further below junk status and on Monday cut Belgium's outlook, while Standard & Poor's lowered Italy's rating outlook over the weekend. Tensions were further heightened Sunday when Spain's governing Socialists took a battering at regional polls as voters protested against austerity at a time when one in five people is looking for work.

The epicenter of the market tensions, however, was in Greece, analysts said.

After repeated warnings that Greece is behind schedule in its austerity reforms, some investors worry that the country may not get its next bailout installment — which it needs to avoid default — from its partners in the eurozone and the International Monetary Fund.

Though Greece managed to get a $154 billion financial lifeline just over a year ago, the consensus in the markets is that it will have to get a second bailout in the next few weeks to avoid some sort of default of its debt.

The prevailing view in the markets is that Greece will get more aid, partly because not doing so may cause an even bigger crisis for the euro. Austrian National Bank governor Ewald Nowotny suggested in Vienna on Monday that the EU Commission and IMF could consider more financial support.

After Greece, the next big concern in the markets is that the contagion that spread from Athens to Dublin and on to Lisbon could soon hit Madrid. Spain's economy is the eurozone's fourth-biggest, so rescuing it could sink Europe's bailout fund, potentially threatening the euro's existence in its current form.

The regional elections over the weekend, which saw the Socialists take a drubbing, have reinforced market fears that the political resolve to drive through often-painful measures to deal with the country's debts will fade. Daily protests against both the Socialists and the opposition conservatives were spreading to cities across the country and expected to last for days.

Downgrades and protests rattle eurozone 05/23/11 [Last modified: Monday, May 23, 2011 10:20pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. McMansions, state sewage order on tap at St. Petersburg City Council

    Local Government

    ST. PETERSBURG — The City Council is set Thursday to vote on two major issues: controversial zoning changes aimed at curbing big McMansion-style homes and a consent order with the state that will require St. Petersburg to fix its ailing sewage system.

    Two big, blocky homes on the 2300 block of Dartmouth, Ave N under construction in April. Several new homes under construction.
in St. Petersburg's Historic Kenwood Neighborhood are too big, residents complain. The St. Petersburg City Council on Thursday is set to consider ordinances aimed at curbing the construction of big "McMansions." [LARA CERRI   |   Times]
  2. Tom James and wife, Mary, talk about their James Museum of Western and Wildlife Art

    Human Interest

    ST. PETERSBURG — As a child, businessman and philanthropist Tom James loved cowboy movies, an affinity that would later play out in a vast collection of Western art amassed over the years with his wife, Mary.

    Tom and Mary James at the site of the Tom and Mary James Museum of Western and Wildlife Art.
Photo courtesy of Raymond James
  3. A reliable Rick Scott ally, Pete Antonacci, named CEO of Enterprise Florida

    State Roundup

    Pete Antonacci, who last week made headlines when he advised scientists to stay in their lane rather than criticize his water agency's work on Everglades restoration, is getting a new job.

    Pete Antonacci, an attorney seen here in 2009, has served many roles for Gov. Rick Scott: general counsel, executive director of the South Florida Water Management District and now, CEO of Enterprise Florida.  [
COLIN HACKLEY | Special to the Times]
  4. Pinellas County budget on the rise thanks to high property values

    Local Government

    CLEARWATER –– After another year of growth, Pinellas County commissioners won't have to fight to pay for critical needs in the 2017-2018 budget.

    The Pinellas County Commission on Tuesday learned the first details of its $2.3 billion spending plan for next fiscal year, which includes funding for the Pinellas County Sheriff's Office. [Courtesy of Pinellas County Sheriff's Office]
  5. Tampa Bay chefs go head to head and Disney Springs gets another James Beard winner

    Food & Dining

    Epic Chef Showdown: Feeding Tampa Bay

    In a shoulder-to-shoulder format cook-off competition, chefs from Parkshore Grill and Mise En Place strove Monday night to become the Epic Chef of Tampa Bay. In this course, using ramen as a mystery box ingredient.