Chaos as fear over break-up of euro grows

Tim Wallace
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STOCKS tumbled on renewed fears that Eurozone leaders would not be able to resolve the crisis soon, as Italy was forced to pay record interest rates to borrow and industrial output data pointed to the heightened risk of renewed European recession.

In the UK, the Financial Services Authority is in talks with banks over plans for a Eurozone break-up, while German Chancellor Angela Merkel restated her belief that the European Central Bank should not be pushed into bailing out indebted nations.

And as Greece moved to hire Allen & Overy, White & Case and Blackstone to negotiate on its debt restructuring ahead of a crunch meeting tomorrow, stocks plummeted across the world.

The French CAC40 fell 3.33 per cent, the German DAX dropped 1.72 per cent, the FTSE100 sank 2.25 per cent and the Dow Jones lost 1.1 per cent.

The euro fell below $1.30, its lowest level since January.

Italy paid a euro-era record yield of 6.47 per cent on €3bn of five-year debt, up from a previous record-high of 6.29 per cent last month.

Such a high interest rate compares with 0.29 per cent paid by Germany on €4.2bn of two-year debt and record lows of 1.023 per cent paid by Sweden on five-year bonds – down from 3.132 per cent paid on similar debt in April.

A recession looms across the Eurozone, with industrial output falling 0.1 per cent in October.