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June 20, 2011    

European stocks down on Greece loan decision

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by Kay Mitchell

Euro zone finance ministers have failed to reach an agreement on Greece’s next loan instalment of €12 billion, which has sent European stocks down – with banking shares hit hardest.

Ministers met in Luxembourg yesterday but delayed their decision on the fifth instalment of Greece’s €110 billion loan until the country introduces further austerity measures.

A statement issued by the ministers called on all political parties in Greece to: “support the programme’s main objectives and key policy measures to ensure a rigorous and expeditious implementation”.

“Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success,” it added.

The Stoxx Europe 600 Index lost 0.9% in mid-morning trading in London, while the euro fell 0.7% to $1.4210 and was down 0.9% against the Swiss franc.

Meanwhile, Italy’s 10-year bond yield rose four basis points after Moody’s Investors Service announced a debt rating downgrade is likely.

In the meantime, Jean-Claude Juncker, Luxembourg’s prime minister and Eurogroup chairman, said he was confident Greece would get a second bailout, providing the Greek parliament supported the new measures.

However, new austerity measures have resulted in further protests after thousands of people gathered outside the parliament building in Athens.

Greeks are opposed to further cuts, which have resulted in tax hikes, spending cuts and privatisation.

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