Indexes fall after Greek bailout vote news

Nov. 1, 2011 at 12:10 PM
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ATHENS, Greece, Nov. 1 (UPI) -- Asian-Pacific stocks dropped sharply Tuesday following Greek Prime Minister George Papandreou's planned referendum on his country's latest bailout deal.

The declines followed a 2.3 percent fall by the Dow Jones industrial average Monday -- the Dow's worst daily decline in a month -- and a 2 percent drop in the euro, which fell Monday to $1.386 and continued to fall as low as $1.38 Tuesday, the lowest since Oct. 20.

Around the region, stocks fell 1.7 percent in Japan, 2.5 percent in Hong Kong and 1.5 percent in Australia.

Stocks were flat in China with the Shanghai composite index up 0.07 percent.

Stocks were down further in midday trading in Europe. The Italian FTSE MIB index fell more than 6 percent. The DAX 30 in Germany fell 4.3 percent. In France, the CAC 40 index shed 4.7 percent.

A Greek vote against the bailout and its highly unpopular austerity measures could upend weeks of negotiations over how to rescue Greece's economy, shore up the eurozone and prevent a global debt crisis on the scale of the Lehman Brothers crash of three years ago, analysts said.

A voter rejection could also remove Greece from the 17-nation eurozone and be seen as a vote of no confidence in the Greek Socialist government, leading to early elections.

Addressing stunned lawmakers Monday evening, Papandreou said the decision on whether to adopt the deal properly belonged to the Greek people.

"Let us allow the people to have the last word, let them decide on the country's fate," he said.

"The command of the Greek people will bind us," he told the lawmakers. "Do they want to adopt the new deal, or reject it? If the Greek people do not want it, it will not be adopted."

The referendum would likely be held in January, Interior Minister Haris Kastanidis said.

A "yes" vote could reduce the massive street protests and strikes threatening to paralyze the country as it enacts brutal austerity programs to earn eurozone and the International Monetary Fund rescue loans, The Wall Street Journal said.

A "no" vote could bring down the government and cut off international funding for Greece. Without the funding, Greece would default on its debt, sending shock waves through the eurozone and the world economy, analysts said.

Papandreou told lawmakers he would seek a parliamentary vote of confidence Friday, four months after winning a similar vote before pushing an earlier batch of austerity measures into law.

Last week, under intense pressure from global leaders fearful of the repercussions of Europe's mounting debt crisis, eurozone members agreed to a plan to cut Athens' debts by 50 percent and provide $180 billion in additional rescue loans to supplement a bailout fund put together with the IMF last year.

European leaders had hoped to take the touted "comprehensive deal" to the Group of 20 meeting of leading global economies in Cannes, France, Thursday.

World leaders, including U.S. President Barack Obama, were expected to gather there to discuss how to supplement a $1.4 trillion package to support Greece, Portugal and Ireland and keep Italy and Spain from defaulting.

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