Markets hit by continuing eurozone debt crisis

The euro and stock markets across Europe have fallen, with the eurozone debt crisis showing no sign of abating.

Borrowing costs for heavily indebted governments also rose further, with Italy and Spain suffering.
Market worries focus on a possible debt restructuring by Greece that could hit Europe's banks and other governments.
Latest bad news included weak eurozone economic data, a local election defeat for Spain's government and a negative credit rating outlook for Italy.
Business confidence European stock markets were down sharply in afternoon trading, with the FTSE 100 1.5% lower, the Cac losing 1.8%, and the Dax falling 1.9%.
Energy and mining stocks were particularly badly hit, as the oil price fell back towards recent lows on fears the global recovery may be slowed by debt problems in Europe and tighter monetary policy in China.
Meanwhile, the euro dropped two cents against the dollar, to below $1.40, bringing its total fall since Friday to nearly four cents.

“Start Quote

We would be letting a genie out of the bottle without knowing in which direction it would be flying.”

End Quote Jean-Claude Juncker Luxembourg Prime Minister and head of the eurogroup

Against the Swiss franc - seen as a haven from the debt crisis - the euro hit a new all-time low of 1.2324 francs.

Sentiment was not helped by the latest purchasing managers index (PMI) for the eurozone - a survey of business expansion plans - which indicated that growth in France and Germany slowed significantly this month.
"The eurozone PMI continued to show robust expansion, but the rate of increase showed the sharpest slowing since just after the collapse of Lehman's in late-2008," said Chris Williamson, chief economist at Markit, the research firm that produces the index.
He pointed to a concurrent fall in service sector business confidence to its weakest since July 2009 as a sign that the slowdown may prove more than a temporary blip.
Any such economic slowdown will intensify market concerns about whether some eurozone governments - chief amongst them Greece - will ever be able to pay off their debts.
'Enormous problem' Meanwhile, in an interview for German weekly der Spiegel, the Luxembourg Prime Minister and head of the eurogroup, Jean-Claude Juncker, reiterated his idea that Greece could be granted a "soft restructuring" or debt "reprofiling", but only if its government met demanding policy targets.
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Market Data

Last Updated at 15:31 GMT

Market index	Current value	Trend	Variation	% variation
Dow Jones	12355.57	Down	-156.47	-1.25%
Nasdaq	2756.17	Down	-47.15	-1.68%
FTSE 100	5844.76	Down	-103.73	-1.74%
Dax	7121.31	Down	-145.51	-2.00%
Cac 40	3910.46	Down	-80.39	-2.01%
BBC Global 30	5662.63	Down	-35.75	-0.63%

Marketwatch ticker

Data delayed by 15 mins

Mr Juncker explained that the restructuring would involve a delay in repayments and a cut in interest payments, to be agreed with the country's lenders.

However, he said it would need to be done in a way that would not be deemed a default by the international rating agencies, which would cause an "enormous problem" for Europe's banks, who would then have to recognise billions of losses on their balance sheets.
"In the case of a national bankruptcy with a subsequent debt restructuring, we would be letting a genie out of the bottle without knowing in which direction it would be flying," he warned.
Mr Juncker also confirmed that any restructuring - and any additional rescue loans - would only be forthcoming if Greece stepped up privatisations and painful austerity measures.
The Greek cabinet met on Monday to discuss a doubling of budget cuts this year to 6bn euros, including public pay cuts, civil service redundancies and an increase in value added tax.
The government also intends to meet opposition leaders later in the week to hammer out a four-year cross-party austerity plan demanded by Brussels.
Meanwhile, Greece's cost of borrowing in bond markets has continued to rise steadily, as expectations of an eventual default rise.
The yield on its 10-year bonds rose another half a percentage point to 16.8% on Monday, up from 15.3% a week ago.
Hidden debts However, other countries also saw their borrowing costs rise, as markets remain concerned that a Greek default could trigger a broader meltdown.
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Euro v US Dollar

Last Updated at 23 May 2011, 15:30 GMT *Chart shows local time

€1 buys	change	%
1.4010	- -0.02	- -1.07

Spain's 10-year borrowing cost increased to 5.6%, its highest level since January.

The Spanish minority Socialist government suffered its worst defeat on record at local elections held over the weekend.
Analysts say that with control of some heavily indebted regional governments changing hands, there are fears that hidden financial problems may be unearthed by the incoming administrations.
The result follows a week of protests by tens of thousands of mostly young people, expressing their anger over austerity measures and the country's high unemployment rate, including a youth unemployment rate of 45%.
Meanwhile, rating agency Standard & Poor's lowered its outlook on Italy's debts to negative, indicating future downgrades are more likely.
Italy's government is said to be planning to bring forwards 35bn-40bn euros (£30bn-£35bn; $49bn-$56bn) of austerity measures to this June in response.
The country's cost of borrowing rose slightly in financial markets following S&P's move, to 4.87% from 4.77%, before falling back again in morning trading.
BBC