Stock markets down on Greek swap fears

Stock markets have declined sharply on concerns ahead of a key deadline to secure Greece's future in the euro.

Investors have until Thursday to sign up to swap their Greek government bonds for debt that pays a lower rate, a deal that helped secure another bailout.

Without the debt swap and bailout, Greece would probably default on its debts later this month. Wall Street's Dow Jones index ended down 1.6%.

The German and French markets earlier lost 3%.

The Dow's fall was the biggest in nearly three months.

Greece's six largest banks have now agreed to participate in the swap.

This announcement, which was fully expected, was made following the close of share trading in Europe.

However, Greece still has to persuade banks across Europe, and it was these that led the share falls across Europe on Tuesday.

In Germany, Deutsche Bank fell 4% and Commerzbank dropped 6%.

In France, Credit Agricole, Societe Generale and BNP Paribas were all down about 6%.

Italian banks such as Unicredit and Banca Popolare di Milano were also sharply lower.


Athens was first bailed out in 2010 with 109bn euros from the European Union (EU) and the International Monetary Fund (IMF). The Irish Republic and Portugal have also received bailouts.

The eurozone set up a bailout fund to try to contain the crisis from spreading to larger economies such as Italy, and also agreed a second bailout worth 130bn euros.

But Greece will not get funds from the second EU/IMF bailout until its private creditors give final approval for their losses on Thursday, EU ministers said last week.

Private bondholders, such as banks and private investors, recently agreed to take a 53.5% loss on their Greek bonds.

Their 107bn-euro losses - the "haircut" - and a huge package of public sector cuts aim to reduce Greek debt from 160% to 120.5% GDP by 2020.

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