Monday, September 12, 2011

Greek default jitters hammer French banks, euro

Growing fears of a Greek default sent a hurricane through heavily exposed French banks on Monday and hit the euro as investor confidence in the European currency area's ability to surmount a sovereign debt crisis ebbed.

Shares in Societe Generale, BNP Paribas and Credit Agricole slumped by more than 10 percent amid expectations of an imminent downgrade by credit ratings agency Moody's, due largely to their exposure to Greek bonds.

The shock resignation of European Central Bank chief economist Juergen Stark last Friday, and weekend comments by German politicians suggesting Athens may have to default and be "suspended" from the euro zone, drove the euro to a 10-year low against the yen and a seven-month low against the dollar, although it later recovered some ground.

"Europe is not just lurching from one crisis to another. It is lurching into a new one before the previous one is solved," said Makoto Noji, senior strategist at SMBC Nikko Securities.

The storm forced SocGen, the hardest hit French lender in recent weeks, to announce further drastic measures it denied only last week were under consideration, speeding up asset disposals and deepening cost cuts to free up 4 billion euros in fresh capital. more