European markets sink as Greece jitters continue

Emma Haslett
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Worries about Greece caused markets' rally to fade (Source: Getty)

Another week, another set of worries about Greece. Although European markets started the day well, that rally faded quickly, with the FTSE 100 falling 0.36 per cent by mid-morning.

At the same time, Germany's Dax dropped 0.29 per cent and France's Cac 40 fell 0.9 per cent. Although the FTSEurofirst 300 opened 0.4 per cent higher, it quickly slid back 0.25 per cent.

The falls followed a weekend of fraught negotiation, during which Greek finance minister Yanis Varoufakis was "bypassed" when EU officials decided to call Prime Minister Alexis Tsipras instead after negotiations with Varoufakis became "unproductive".

Not surprisingly, this morning Greek bond yields rose further, with three-year notes hitting 26.69 per cent, while 10-year yields jumping 0.9 percentage points to 12.81 per cent. Meanwhile, the euro slid 0.31 per cent against the dollar to $1.0839.

German finance minister Wolfgang Schaeuble appeared to exacerbate the situation when he hinted on Friday that plans are being drawn up to deal with a Greek default.

Asked about a possible "plan B" at a press conference following negotiations in Riga, Schaeuble shot back that "you shouldn't ask responsible politicians about alternatives".

If a responsible member of the eurogroup, or any responsible politician, were to answer this question with "yes", we know what would happen. If he answered it with "no", which I have done here by not even accepting the question, then we know that you won't believe me.

The comments are likely to have caused further skittishness in the market. As IG Market analyst Alastair McCaig pointed out, "it's one thing to do it and it's another to tell everyone you are".

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