Europe: Stocks drop on Greek default fears

[LONDON] Europe's main stock markets sank on Friday as eurozone officials reportedly discussed a "worst case" scenario of a Greek default, the day after key creditor IMF said they were far off reaching a deal.

London's benchmark FTSE 100 index of top companies closed down 0.90 per cent at 6,784.92 points.

In the eurozone, the CAC 40 in Paris lost 1.41 per cent to end the day at 4,901.19 points, and Frankfurt's DAX 30 dropped 1.20 per cent to 11,196.49 points.

Athens' main index plunged 5.92 per cent to 774.16 points, giving up most of its optimistic eight per cent surge the day before.

In Brussels eurozone officials told AFP that at a meeting in Bratislava on Thursday they had war-gamed "worst case" scenarios of Greece not being able to pay its bills.

"In discussions, a default was mentioned as one of the scenarios that can happen when everything goes wrong," said one official on condition of anonymity.

"Time is running out for Greece. To clinch a deal at the 18 June Eurogroup meeting of finance ministers in time for the 30 June expiry of the current bailout deal, the Greek government has to shift its position very soon, that is within about three days," said analyst Holger Schmieding at Berenberg.

And after the markets closed, the Greek government issued a statement saying it would make "counter-proposals" on a deal to unlock much-needed bailout funds in Brussels on Saturday.

In foreign exchange activity, the euro rebounded slightly to US$1.1278 from US$1.1260 late on Thursday in New York.

Greece must reach a compromise with its creditors - the International Monetary Fund, European Commission and European Central Bank - before the end of the month. Failure to do so will lead it to default and possibly exit the eurozone.

"Crunch time is near and the IMF's departure sent a strong message that the responsibility lies with Greece to make the concessions needed to settle a deal," said Jonathan Loynes, chief European economist for Capital Economics.

A poll released Friday showed a majority of Germans (51 per cent) no longer support Greece staying in the eurozone, a near 20-point jump from a poll at the start of the year.

The IMF on Thursday withdrew from eleventh-hour talks in Brussels, saying an agreement remained far-off after a five-month stalemate with Greece's anti-austerity government, which faces being unable to pay huge debts at the end of the month.

Eurogroup chief Jeroen Dijsselbloem insisted on Friday that a bailout deal for cash-strapped Greece without the IMF's involvement would be "unimaginable".

Without the IMF, a deal is "unimaginable because it needs to have proper content and if it has proper content, the IMF will also participate," Mr Dijsselbloem told journalists in The Hague.

US stocks moved lower Friday on renewed worries over a potential Greek debt default.

The Dow Jones Industrial Average was down 0.88 per cent to 17,879.75 points in mid-day trading in New York.

The broad-based S&P 500 fell 0.61 per cent to 2,095.97 points, while the tech-rich Nasdaq Composite Index lost 0.53 per cent to 5,055.47.

Asian equities were boosted by the positive showing in New York on Thursday after US retail sales pointed to the world's biggest economy back on the road to recovery after a wobbly few months at the start of the year caused by a severe winter.

Hong Kong rose 1.39 per cent, Shanghai added 0.87 per cent and Tokyo climbed 0.12 per cent in value.

AFP