Concern as euro sinks to two-year low against the dollar
EU leaders meet in Brussels as fears of Greek currency exit grow
THE euro sank close to a two-year low against the dollar yesterday as European leaders prepared to meet in Brussels amid concern Greece will exit the currency union. Stocks and commodities also tumbled.
The single currency weakened as much as 0.9pc to $1.26, the lowest since July 2010, in New York trading. The MSCI All-Country World Index, which tracks the world's biggest shares, lost 2pc to complete its biggest slide since March.
European leaders met last night to discuss the region's debt crisis as deepening concern about a possible Greece exit has wiped $4 trillion from equity markets since the beginning of the month.
Reuters reported yesterday that eurozone officials have told members of the currency area to prepare contingency plans in case Greece decides to quit the bloc, an eventuality that Germany's central bank said would be "manageable".
Three officials said that the instruction was agreed on Monday by the Eurogroup Working Group (EWG) -- experts who work on behalf of the bloc's finance ministers.
In its monthly report, Germany's Bundesbank said the situation in Greece was "extremely worrying" and that it was jeopardising any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.
It said a euro exit would pose "considerable, but manageable" challenges for its European partners.
Greek officials have said that without outside funds, the country will run out of money within two months.
For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not huddled beforehand to agree positions, marking a significant shift in the Franco-German axis which has traditionally driven European policymaking.
Instead, new French President Francois Hollande met Spanish Prime Minister Mariano Rajoy in Paris to discuss policy, before the pair travelled to Brussels for yesterday's summit.
"Conditions remain very fragile," said Daphne Roth, the head of Asian-equity research at ABN Amro Private Banking in Singapore. "There is a strong likelihood that Greece might exit the eurozone. Even if it stays, going forward there will be a lot of volatility."
The S&P 500 dropped for the first time in three days. Dell tumbled 15pc after it said sales would be lower than analysts expected. Hewlett-Packard, Microsoft and Intel fell more than 2.8pc to lead losses in 29 of 30 stocks in the Dow Jones Industrial Average. (Additional reporting by Bloomberg and Reuters)