Greek vote sets off ‘pandemonium’, engulfs Italy
Greece’s startling decision to call a referendum on last week’s EU summit deal has set off wild tremors across the eurozone, pushing Italy to the brink of a perilous downward spiral.
By Ambrose Evans-Pritchard
01 Nov 2011
The country’s ruling Pasok party appeared to be splintering on Tuesdsay night, leaving it unclear whether the governent of premier George Papandreou can survive a parliamentary vote of confidence on Friday.
Signs that the EU’s pain-stakingly negotiated Grand Plan is unravelling within days has been a profound shock to confidence.
A frantic search for safe havens led to the second biggest one-day fall ever recorded in Europe’s AAA bond yields. Ten-year German Bund yields tumbled 25 basis points to 1.77pc, with similar moves in non-EMU Swedish and Danish debt. British Gilt yields fell to 2.2pc.
Italy took the brunt of the punishment. Spreads over Bunds spiked to a crisis-high of 459 basis points before the European Central Bank came to the rescue. Spanish spreads reached 384.
Andrew Roberts from RBS said Italy’s debt stress is “dangerously close to a level that could cause pandemonium in financial markets”.