Indications Germany is preparing for a default by Greece added to turmoil in European credit markets on Monday, while global equities sold off sharply as investors weighed the potential damage to the region’s banking system.
German Economy Minister Philip Roesler told German newspaper Die Welt that an “orderly default” by Greece can’t be ruled out, while news reports last week and over the weekend said the German government has made preparations to help shore up its banking sector in the event of a Greek default.
Greek credit default swaps now point to a 97% chance of default, while already sky-high two-year yields continued to rise.
Banking shares tumbled, with French banks dropping sharply on fears of potential downgrades by ratings agency Moody’s Investors Service amid concerns over exposure to Greek debt. Read Europe Markets. more