12/9/11 - Black Monday? Markets go into a tailspin as Germany warns of Greece bankruptcy

September 12, 2011 – ATHENS – Germany has stepped up its rhetoric against Greece, warning that the debt-laden country could default on its debts in a move that highlights the growing divisions at the heart of Europe. Philipp Roesler, Germany’s economy minister, said an “orderly default” for Greece could no longer be ruled out and branded the country’s deficit-reduction measures “insufficient.” The warning is likely to spook financial markets further and comes despite Greece yesterday announcing a fresh €2bn (£1.7bn) of budget cuts and the introduction of a country-wide real estate tax. Evangelos Venizelos, the finance minister, said the cuts and tax measure were necessary to allow Greece to meet obligations demanded by the European Union and IMF in exchange for bail-out funds. Writing in the Die Welt newspaper, Mr Roesler said: “To stabilize the euro, we must not take anything off the table in the short run. That includes as a worst-case scenario an orderly default for Greece if the necessary instruments for it are available.” He said such a default would mean “re-establishing the affected state’s ability to function, perhaps with a temporary restriction of its sovereign rights.” Mr Roesler’s comments come as Germany’s Der Spiegel magazine said finance minister Wolfgang Schaeuble had ordered preparations be made for a Greek bankruptcy. The report claimed the German government is preparing for two eventualities under that scenario – Greece staying in the euro or the country exiting and reintroducing the drachma. Despite the speculation, the European Commission said it was sending a team to Athens “in the next few days” tasked with finalising the payment of a new tranche of loans for Greece by the end of the month. G7 finance ministers late on Friday vowed to “take all necessary actions to ensure the resilience of banking systems and financial markets.” However, underlining the difficulties facing German authorities, a survey showed 53pc of Germans oppose further aid for Greece and would not save the country from default should it fail to fulfil loan criteria. -Telegraph

TEL AVIV — Major French banks might be downgraded by Moody’s Investors Service this week because of their exposure to Greek-government debt, media reports say. The Wall Street Journal reported Monday that such downgrades could signal that the debt crisis on the euro zone’s periphery is seeping into the broader regional financial system. Europe’s leaders have been trying unsuccessfully for nearly two years to bring the debt crisis under control, the Journal reported. That’s forced European leaders to consider more tightly integrating the euro zone, even as the public grows more skeptical that that’s the correct course, the Journal reported. -Marketwatch

AUSTRALIA - MORE than $45 billion was wiped from the value of all Australian companies as local investors reacted to turmoil in the European and US markets. In a trading day that went from bad to worse, the S&P/ASX200 index closed down 156.2 points, or 3.72 per cent, at 4038.5, while the broader All Ordinaries index was 152.3 points, or 3.56 per cent, lower at 4125.1. The last time the market dipped to that level was in August, during a week when the S&P/ASX 200 index fell below 4,000 for the first time in a year. This afternoon’s share-market tumble followed on from a sharp drop of 2.5 per cent this morning, as fear gripped investors following weak leads from US stocks and fresh Euro debt concerns. “No one really has any idea where this whole situation may end up,” said IG Markets strategist Ben Potter.  “It’s the threat of contagion that is causing the greatest concern,” he said. “Everyone remembers the early stages of the global financial crisis, where everyone was saying it was contained and there was no chance of it spreading. How wrong they were.” –News.com