Spain tumbled into recession and European stock markets and the euro fell Thursday as Greece installed a crisis government to tackle its crippling debt, EU leaders prepared for talks and analysts raised the spectre of a run on eurozone banks.(Full story here). It probably doesn't help that Moody's is planning on downgrading Spanish banks, and had downgraded 26 Italian banks a couple days ago. Of course, unlike what the Italians seem to think, the answer is not to shoot the messenger.
"Markets are worried about eurozone bank deposit runs and an escalating banking crisis," London-based VTB Capital economist Neil MacKinnon told AFP.
Heavy withdrawals of deposits have been reported in Greece and Spain, and top European Union leaders were to hold a videoconference later in the day.
They were initially to discuss an upcoming G8 meeting of industrialised countries but were now faced with a serious deterioration of the situations in Greece and elsewhere across the eurozone.
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"Confidence in European equities (is) quickly depleting, this time after the European Central Bank admitted it had stopped providing liquidity to some Greek banks," noted analyst Craig Erlam at trading group Alpari.