Greece debt fears fuel FTSE panic
Renewed concern that Greece will default on its debts has sparked fresh panic among traders today as London's leading shares continued their woeful run.
The FTSE 100 Index in London dropped more than 2% today, at times sinking below the 5000 mark, after Greece admitted it will miss its deficit reduction targets.
That means London's blue-chip shares index has continued its dire performance after enduring its worst quarter in nine years, with about 14% wiped off its value in the three months to the end of September.
It was a similar story across world markets today, with the Dax in Frankfurt down 3% and the CAC-40 in Paris off more than 2%. It followed falls overnight on Asian markets, as the Hang Seng in Hong Kong lost nearly 4%.
The Greek government's admission that it will miss its tough deficit reduction targets cast fresh doubts as to whether it will be allowed the next tranche of its 110 billion euro (£94.4 billion) bailout.
The debt-stricken country has previously warned that, if it does not receive the money, it could go bankrupt within weeks, which would cause financial chaos.
Meanwhile, reports that Belgian bank Dexia is in need of a government bailout added to fears about the health of the banking sector.
As the cost of insuring bank debts across the world rose to levels not seen since the financial crisis, there is now speculation of another credit crunch as confidence in lending dries up.
Traders are worried that political leaders do not seem to be able to tackle the problems of high debt and slowing economic growth in many western nations, which have plagued markets for months.
Cameron Peacock, market analyst at IG Markets, said no-one has an answer to the problems, and as a result the markets continue to be "in a state of limbo".
He added: "Despite best intentions, politicians and central bankers have been unable to come up with any meaningful solutions and this has in turn eroded the market's confidence that there's any light at the end of the tunnel.
"Talk and speculation of what might happen has yet to translate into decisive action and, until it does, markets are sure to bounce around on high volatility, which in itself will act as a deterrent for retail investors in particular wading into the market."