Markets down on Greek referendum
July 6, 2015
European stock markets slid at the start of trading Monday - but not dramatically - after Greece's voters rejected creditors' demands for further cutbacks in wages, pensions and government spending in a referendum on Sunday, putting the country's ability to continue as a member of the eurozone into doubt.
Frankfurt's blue chip DAX index shed 2.1 percent at the open and the CAC 40, France's equivalent, dropped 1.1 percent compared with Friday's close. Asian markets also dropped - with the Nikkei down 2.1 percent and South Korea's Kospi down 2.3 percent.
Commenting on the referendum results, Pavel Molchanov, an equity research analyst at Raymond James, said: "The result was clearly a more decisive 'no' than the polls had suggested. This couldn't be more bearish for equities and commodities alike."
The scope for compromise in future negotiations on a financial rescue package for Greece, led by fellow members of the eurozone, remains unclear.
Limited downside
A "Grexit," or Greek exit from the eurozone, would likely shake markets at least transiently, but many believe the overall economic impact would be limited by the relatively small size of the Greek economy.
Greece's GDP is less than 2 percent of the 19-nation eurozone's total GDP. The country has a population of 11 million and a GDP of 219 billion euros ($242 billion).
The European economy as a whole and European banks in particular are much less fragile than they were when the Greek crisis first flared up in 2010, when it became apparent that the country's government was effectively insolvent and would need external financial support or debt restructuring.
As long as the euro remains the official currency of strong economies like Germany, the Netherlands, Austria and France, it will likely remain resilient in the face of turmoil amongst the currency zone's smaller members.
"We think the market reaction is likely to be sharp at first but then reverse higher in the coming weeks, as long as eurozone policymakers react in a proactive way," said Paul Christopher, global market strategist for Wells Fargo.
nz/ng (AP, dpa)