The euro dived and shares suffered sharp losses after a controversial bailout package for Cyprus threatened to trigger fresh turmoil in the eurozone.
Eurozone finance ministers demanded on Sunday that Cypriots pay up to 10% of their bank deposits in exchange for a €10bn (£8.5bn) bailout, prompting panic across the island as people rushed to cash machines to withdraw their savings.
Traders are concerned this could set a dangerous precedent that could trigger bank runs in other eurozone countries.
Mohamed El-Erian, the chief executive of Pimco, the world’s largest bond investor, said: “In Europe, [the Cyprus bailout] could well undermine the recent tranquil behaviour of depositors and creditors in other vulnerable European economies – in particular Greece, Italy, Portugal and Spain.”
The euro slid as low as $1.2888 in early trade, its lowest point since December. One euro is now worth 86p.
In the stock markets, the FTSE 100 tumbled 100 points in the opening minutes of trading, to 6390, a fall of 1.5%. France’s main share index, the CAC 40, dropped 2.1%. Spain’s IBEX was down 2.9%, while the Italian FTSE MIB sunk 2.8%.
Source: Guardian.co.uk | Josephine Moulds