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Shizuo Kambayashi/AP

Markets enter panic mode as fears grow over Greek default

Rumours that Greece may still default have sent markets into a nosedive, as the Euro falls and the cost of borrowing rises.

THE WORLD’S MARKETS have nosedived today amid fears that Greece may still default on its loans – despite the agreement of two separate bailout packages for the struggling Mediterranean state.

Fears of a default have not been helped by rumours that Angela Merkel’s coalition government has today fallen into conflict over how it should respond to Greece, with Merkel wanting to give Greece more time while coalition partners demand that a default be permitted.

In London the FTSE100 is down 2.6 per cent, while markets on the continent fare worse with the DAX in Frankfurt down by 4 per cent and the CAC 40 in Paris off by almost 5 per cent.

The ISEQ index in Dublin is also bearing losses, down by about 2.4 per cent at 1:30pm.

Futures markets also pointed to a poor opening in the US, with the Dow Jones, S&P 500 and the NASDAQ all due to lose around 2 per cent when they open at 2:30pm Irish time.

The Euro has reversed some of its earlier losses, standing at $1.365 and at just over 86p this lunchtime. It had earlier traded at closer to $1.35 against the US dollar – its lowest value in months.

The cost of borrowing for governments around Europe is also up today: while the cost of a 10-year loan to the UK is down, at 2.2 per cent, Spanish borrowing costs are now 5.25 per cent – despite the continued intervention of the European Central Bank, which is buying the bonds secondhand.

Similarly, the price of a 10-year loan for the Italian government is up to almost 5.5 per cent – not helped by an auction of 12-month bills earlier, which fetched an interest rate of 4.153 per cent, compared to 2.959 per cent for a similar auction only last month.

All data, except ISE, provided by Bloomberg.

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