European stock markets rocked by panic selling as debt crisis reignites
Europe‘s sovereign debt crisis exploded back into life on Tuesday, with markets across the continent rocked by a wave of panic selling amid renewed fears about the impact of savage austerity measures in Spain and Italy.
The mood of uneasy calm seen across Europe since the Greek bailout in February was shattered as financial markets took fright at evidence of a double-dip recession and growing popular opposition to welfare cuts and tax increases.
Italy and Spain, the eurozone’s third and fourth biggest economies, were at the centre of the market turmoil, with investors demanding an increasingly high premium for holding their bonds.
“Spain is right in the centre of a European storm,” admitted finance minister Luis de Guindos, who declined to rule out an eventual bailout but insisted it could be avoided.
In Italy, Mario Monti’s coalition government is facing growing hostility to reforms of its labour market, while the sheer size of the country’s public debt made it an obvious target for nervous traders. The prospect of Greek voters rejecting austerity and the French electorate denying Nicolas Sarkozy a second term as president was also weighing on the markets.
The Greek government said it would hold a general election on 6 May, with opinion polls showing support for the mainstream pro-austerity parties is too weak to allow them to form a government.
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