Stocks rose sharply yesterday as the Greek prime minister bowed to massive political pressure to scrap a referendum on a European bailout plan. A surprise rate cut from the European Central Bank also helped boost sentiment following days of turmoil in financial markets.
However, the main focus centered on Athens where Greek Prime Minister George Papandreou faced intense pressure to resign and let a coalition government approve a European bailout plan instead of holding a risky referendum on it.
Papandreou has withstood the pressure to stand down and now says he is seeking emergency talks with the opposition, in the apparent hope of forging a national unity government. Papandreou made the comments in an emergency Cabinet meeting yesterday. His office released his speech to the ministers.
Papandreou’s unexpected announcement Monday that he intended to put the hard-fought bailout package to a referendum horrified Greece’s international partners and creditors, triggering turmoil in financial markets as investors fretted over the prospect of a disorderly default and the country’s exit from the 17-nation eurozone.
“With a sharply diminished majority and defections from his party almost daily perhaps the Greek leader realised before anyone else that his way forward is blocked at every turn,” said Andrew Wilkinson, an analyst at Miller Tabak & Co.
“His only way to stop political bickering and back stabbing is to throw fuel on the fire, creating sufficient illumination for politicians and people to see clearly enough that there is only one path ahead,” he added.
News that the vote has been scrapped helped ease those concerns.
In Europe, Britain’s FTSE 100 was up 1.1 per cent at 5,546. France’s CAC-40 rose three per cent 3,204 while Germany’s DAX was also three per cent higher at 6,144.
Despite yesterday’s recovery, markets remain jittery about how Europe will resolve its debt crisis, especially now that it’s been openly admitted that a country can actually leave the euro.
Premier Silvio Berlusconi’s government in Italy was teetering as well after it failed to come up with a credible plan to deal with its dangerously high debts, and Portugal demanded more flexible terms for its own bailout. The euro was up 0.6 per cent at US$1.3771.
Earlier in Asia, Hong Kong’s Hang Seng retreated 2.5 per cent to close at 19,242.50. South Korea’s Kospi lost 1.5 per cent to 1,869.96 and Australia’s S&P/ASX 200 shed 0.3 per cent to 4,171.80.
Mainland Chinese shares rose, with the benchmark Shanghai Composite Index gaining 0.2 per cent to 2,508.09. (AP)
