Fear that Greece may be on verge of default hurts markets, bank stocks in particular

Pan Pylas, AP Business Writer, On Monday September 12, 2011, 5:09 pm EDT

LONDON (AP) — Fear that Greece will default on its debt, perhaps triggering a financial chain reaction that will cause another global recession, hurt European stocks Monday and sent American stocks lower for a time.

The market tension came after a German politician suggested Greek finances are so bad the nation might have to leave the coalition of 17 countries that use the euro as their common currency.

In addition, the German economy minister published an op-ed arguing that an “orderly bankruptcy” of Greece must be an option. Greece has been relying on international bailouts to keep it solvent.

Germany’s opinion on the Greek crisis is taken seriously because Germany has the strongest economy in Europe. A spokesman for Chancellor Angela Merkel played down both suggestions, but financial markets were spooked anyway.

The Stoxx 50 index of blue-chip European stocks fell 2.6 percent. In the United States, the Dow Jones industrial average was down 167 points, or 1.5 percent, before turning around late in the day to close up almost 70.

“With German officials seemingly in destructive overdrive, as per all the public talk of preparing for a Greek default and even a Greek euro exit, markets can hardly be blamed for the latest charge for the bunker and tin hats,” said Marc Ostwald, market strategist at Monument Securities. For more visit: Yahoo finance

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