Debt Crisis: European stock markets steady on close despite Greek default fears
Europe’s leading shares ended the week slightly higher but world leaders failed to ease global recession fears.
London’s FTSE 100 Index lost 5.6pc or £78bn (€89bn) from its value this week, which is the second worst weekly fall this year, despite a last-minute push which saw it close 0.5pc higher on the day.
Other big indices like France’s CAC and Germany’s DAX managed to claw back some losses before closing but ongoing fears that Greece will default and the contagion from Europe’s debt crisis will spread to the already-weak US economy weighed in investors minds.
A gloomy outlook from America's central bank, weak Chinese and eurozone economic data and the enduring sovereign debt crisis battered investors' confidence throughout the week.
While the US markets opened lower today, they also managed to pare back some losses when European markets closed.
But all eyes were on Greece as default talk gained traction.
European Central Bank council member Klaas Knot told a Dutch newspaper that a default is a possibility.
"It is one of the scenarios," he told Dutch daily Het Financieele Dagblad. "All efforts are aimed at preventing this, but I am now less certain in excluding a bankruptcy than I was a few months ago."
G20 leaders meeting in Washington said European leaders have six weeks to find a solution to the debt crisis with Italy and Spain also finding it more difficult to borrow money.
With pressure growing on European banks, especially those exposed to Greek debt, signs emerged that leaders will intervene shortly to calm markets.
Ewald Nowotny, another ECB council member said: "During the time of the financial crisis, one of the instruments we had was ... one-year tenders. I think it might be advisable to think about reintroducing this approach," he said.
According to the International Monetary Fund, European banks need about €300m in funding following the debt crisis but many analysts believe the figure is much higher.