European stock rebounds
Markets across Europe recovered somewhat yesterday as EU central banks and finance ministers attempted to allay fears about the debt crisis.
The rebound came off the back of proposals to increase the European Financial Stability Fund (EFSF) to €3 trillion.
The DAX in Germany rose by 3.7%, the CAC rose by 3.5% while the FTSE increased 1.4% as Europe big powers all showed signs of improvement. Shares in a lot of the major European banks also gained by close of business yesterday, as talk of the increased fund came to the fore.
Europe is now preparing itself for what it has called an “orderly” default in the Greece situation, with the EFSF increasing it reserve from €440 billion to €3 trillion. Banks and bondholders across the Union will be taking a substantial hit if the Greeks do indeed default and need this increased fund to cope with losses incurred due to such default.
This follows on from US Treasury Secretary, Timothy F. Geithner, warning the IMF that if they did not effectively deal with the Greek crisis, it would lead to”cascading default, bank runs and catastrophic risk.”