Markets slide as Greece edges towards default

Asian and European stocks nose-dived and the euro reached an eight-month low against the dollar on Monday after Greece announced the day before it would fail to meet budget deficit targets. The targets are linked to a bailout package that Greece needs to pay salaries and other bills this month. 

Reuters/Panagiotis Tzamaros

Athens says the deficit will reach 8.5 per cent of Gross Domestic Product, GDP, this year instead of the 7.6 per cent set by the European Union and the IMF.

In 2012, Greece expects a further reduction of the public deficit to 6.8 per cent of GDP not as much as the forecast 6.5 per cent.

The announcement saw the Frankfurt market drop more than three per cent while London’s FTSE and the Paris CAC 40 both fell over two per cent.

Eurozone finance ministers are to meet in Luxembourg on Monday to find an agreement on unlocking the next eight-billion-euro tranche of the bailout package which has been blocked by the IMF for the past month.

EU economic and monetary affairs commissioner Olli Rehn will be there to tell the ministers what the IMF wants to do. The US and other major economies fear Europe is too divided to solve the Greek problem and a ricochet effect could rip through global markets.

Meanwhile, international auditors spent the weekend trying to obtain the most accurate picture of the country’s finances, but were hampered by striking civil servants who barred their way into the national statistics office.

Prime Minister George Papandreou an extraordinary cabinet meeting on Sunday that everything would be done to ensure the credibility of the country.

I want to repeat that we will be unswerving in our goal,” he said.

The government plans a number of austerity measures including a scheme to place 30,000 civil servants temporarily in a "labour reserve" on reduced pay from December. The measure will apply to employees aged 60 and over.

Athens is currently struggling under at least 350 billion euros of debt.