June 16, 2011
LONDON — Escalating political turmoil in near-bankrupt Greece intensified concerns Wednesday that the Mediterranean nation may be spiraling toward a calamitous default with investors, potentially igniting a new phase in Europe’s debt crisis.
Global markets shuddered as embattled Greek Prime Minister George Papandreou launched a risky gambit to push his Parliament to pass another round of austerity measures. Failure to pass the cuts could lead the European Union and International Monetary Fund to withhold bailout money, leaving Greece short of cash to pay its creditors as early as next month — an event that some economists warn could destabilize the global financial system.
After thousands of protesters clashed with police as Parliament debated the measures in Athens, Papandreou tried and failed to forge a coalition government to ensure the package’s approval. In a late-night speech to the nation, he then said he would reshuffle his cabinet and call for a vote of confidence this weekend, wagering his job in an attempt to strong-arm politicians into passing the hugely unpopular package next week.
The spectacle spooked investors; in the United States, the Dow Jones industrial average fell 1.5 percent, almost 179 points, to 11,897.27. Markets around Europe dropped by a similar amount Wednesday, and continued the slide Thursday morning.
The political drama in Greece is playing out against deepening fears that the Mediterranean country poses a broader risk to the economic recovery underway in Europe and the United States. Some experts have compared a Greek default to the collapse of Lehman Brothers in September 2008, suggesting it could touch off a run of bank failures that could ripple across the globe.
Read more at The Washington Post.