Greek exchange sinks to 1992 level with exit fears
ATHENS' stock market collapsed to its lowest level since 1992 yesterday as the country failed once more to create a stable government.
German finance minister Wolfgang Schaeuble all but dared the Greeks to quit the common currency.
Mr Schaeuble's claim that the euro area could handle a Greek exit came hours before ratings agency Fitch said such an event would trigger an "immediate risk" of downgrade for eight countries, including Ireland.
Spanish markets also went into freefall as markets were decidedly underwhelmed by the authorities' decision to ask banks to raise just €30bn to cover real estate loans, well below the €50bn expected by some observers.
The Greek and Spanish woes combined to push the already-battered euro to a new three-month low of $1.2909 early in the day, before recovering to $1.2955, and then falling again to $1.2919.
Greece's fate has been in peril since the country's two mainstream pro-bailout parties failed to gain a majority in last weekend's elections. Last night, a third attempt to form a new government collapsed.
A newspaper article in Germany's 'Rheinische Post' quoted Mr Schaeuble as saying that the euro area could handle a Greek departure as "the risks of contagion for other countries of the eurozone have been reduced".
Later in the day, Germany's foreign minister Guido Westerwelle upped the ante more by stressing that the EU-IMF loans needed to stave off bankruptcy hinged on continued spending cuts and tax hikes.
"The future of Greece in the eurozone lies in the hands of Greece," Westerwelle told the Bundestag lower chamber.
The increasingly likely spectre of a 'Grexit' plunged Athens' stock markets down more than 4pc, to 1992 levels.
The Greeks are now contemplating fresh elections in June, a vote which ratings agency Fitch last night said would be "a critical event for both Greece and for the eurozone.
"The implications for the eurozone of a Greek exit are highly uncertain and would depend on how it happens and the European policy response," the ratings agency said.
It added that, if Greece did leave the eurozone, Fitch would "likely place the sovereign ratings of all the remaining euro area member states on Rating Watch Negative (RWN) as it re-assessed the systemic and country-specific implications of a Greek exit".
The ratings agency also signalled out eight countries already on ratings watch negative as being "at most immediate risk of downgrade" but said the sovereign ratings of all eurozone countries would "potentially be at risk".