Stock markets braced for more turmoil as Greek default looms
Stock exchanges are braced for the start of another potentially turbulent week as they react to reports of a three trillion euro bailout package.
Share prices tumbled around the world last week amid mounting frustration at the failure of eurozone countries to act to resolve the Greek debt crisis which is threatening global turmoil.
Finance ministers gathered in Washington for crisis talks were reported to have accepted that Athens would be allowed to default on some of its debts.
Chancellor George Osborne warned that decisive action was required within six weeks, saying the world had reached a “dangerous phase” amid fears of a renewed recession.
He said he was “optimistic”, however, that the gathering of colleagues from the G20 nations and a meeting of the International Monetary Fund (IMF) had made progress.
After Saturday's meeting, the IMF sought to reassure markets with managing director Christine Lagarde saying there had been a “common diagnosis and a shared sense of common purpose”.
“There was a dialogue and there was a clear response,” she told a press conference, including the IMF ensuring it was “fully involved”.
The situation remained “precarious”, however, the IMF noted, and suggested that it may not have the funds to bail out larger eurozone economies if the crisis is allowed to spread.
That raised fears among eurosceptics about a potential new call on UK funds.
Mr Osborne said: “At this meeting we have seen the eurozone understand that they are at the epicentre of this global debt crisis, that it has entered a dangerous new phase and that the sooner we resolve it the better for the whole global economy.”
He told eurozone countries the meeting of G20 nations in France at the start of November must be the final deadline for action.
Former chancellor Alistair Darling said the situation was more serious than the 2008 crunch.
“There are lessons to be learnt and frankly they are not being learnt,” he told Sky News.
A late rally on Friday was not sufficient to prevent the Ftse 100 suffering its second worst weekly fall this year, losing 5.65%, or £78bn, from its value.
A plan to rescue the European single currency, costing two-three trillion euros (£2.6 trillion), could be revealed within days, according to several reports.
It is believed to involve beefing up the European Financial Stability Facility (EFSF) and an injection of funds into a number of continental banks.
The plans would lead to an orderly default by Greece but allow the country to remain within the eurozone in a bid to relieve some of the economic pressure on Spain and Italy.