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Euro zone debt worries knock stocks

posted 18 Apr 2011, 08:47 by Mpelembe   [ updated 18 Apr 2011, 08:50 ]
The euro is slipping against the dollar and European banking stocks are falling as speculation grows that Greece may need to restructure its debt.
EUROPE-DEBT CRISIS - It's almost a year since Greece received an EU / IMF bailout, but it's still struggling to pay its debt.

Market worries about Greece and other indebted euro zone countries have resurfaced - and are knocking European shares again.

Investors are concerned Greece could be forced to restructure its debt, and banking stocks slipped sharply

on Monday.

French banks Societe Generale, Credit Agricole, and Spanish lender BBVA all lost at least three percent.

Greek banks also fell on the day - while Greek, Spanish and Portuguese bond yields widened.

These concerns have hit the euro, which reached a 10-day low against the dollar. Adam Myers is a senior market strategist at Credit Agricole.

 Adam Myers, Senior Market Strategist, Crédit Agricole CIB, saying:

"If there is a restructuring then of course currency markets will react far more negatively than they already have and we could see the euro weaken quite significantly against all currencies but particularly against the U.S. dollar."

Greece - along with top EU and IMF officials - have repeatedly dismissed media reports it will need to restructure its debt. But sources say leading voices in the German government believe a debt restructuring is highly probable.

Adam Myers, Senior Market Strategist, Crédit Agricole CIB, saying:

"With the current debt financing ratios that the government is experiencing and interest rates which the Greek government is having to pay being very high given their revenue stream working with, it does look like a restructuring is on the cards."

French Finance Minister Christine Lagarde said on Monday Greek restructuring would be "catastrophic".

The challenge for Greece will be meeting the demands of debt repayment while growth looks to remain sluggish for the foreseeable future.

Joanna Partridge, Reuters