Fresh debt fears rock world markets

FEARS the €110bn bailout package for Greece might not be enough to stop the spread of the Eurozone debt crisis sent markets worldwide plunging yesterday.

The FTSE 100 plummeted 2.6 per cent to 5,411.11, the pan-European Stoxx 600 Index dropped 2.9 per cent to 252.96 – erasing its gains for the year, and the S&P 500 slumped 2.38 per cent to 1,173.60 – its worst close for three months as investors anxious over the high sovereign-debt levels in Spain, Italy, Portugal and Ireland rushed to dump shares.

The wave of selling, forced Spanish Prime Minister Jose-Luis Zapatero to deny that his country was seeking a financial rescue yesterday as “absolute insanity” amid mounting concern of financial contation.

Meanwhile, the euro slumped to $1.3021, its lowest level since May last year – hit by the European Central Bank’s decision to ease the pressure on Greek banks by accepting any Greek government bonds, regardless of rating, as collateral for loans.

“Markets have given a clear ‘thumbs down’ to the Greek aid package,” said Win Thin, an analyst at Brown Brothers Harriman.