Financial markets tumble on news of unrest in Greece and Spain

September 26, 2012 – LONDON — Clear signs of the political and social cost of the euro zone crisis sent financial markets tumbling Wednesday as debt-laden Greece faced a crippling 24-hour strike and Spain cleaned up after violent protests Tuesday near the country’s Parliament. Spanish bond yields approached 6 percent for the first time in months, while European shares and the euro fell sharply, as developments in Greece and Spain sent a new wave of anxiety through the ranks of international investors. The Euro Stoxx 50, a measure of euro zone blue chips, was down 1.60 percent in early trading Wednesday. National indexes were also down by between 1 percent and 3 percent. The euro was at $1.2865, down from $1.2950 late Tuesday in New York. The single currency had dipped to $1.2856 at one point, its lowest level in two weeks. The yield, or interest rate, on Spanish 10-year bonds was at 5.902 percent, up 21.5 basis points. Spanish bond yields had fallen back from levels thought unsustainable after the European Central Bank announced a plan to buy the sovereign bonds of troubled euro countries in amounts sufficient to bring borrowing costs down. A renewed spike in borrowing costs indicates that the E.C.B.’s plan is losing the power to calm markets. It also puts pressure on the Spanish government at a time when it is hoping to avoid a full-scale bailout. Bond yields also rose in Italy ahead of an auction of the government’s debt Wednesday. The 10-year Italian sovereign bond traded to yield 5.172 percent, up 9.5 basis points. A basis point is one-hundredth of a percentage point. Leaders in Greece and Spain are confronting difficult decisions on spending cuts designed to satisfy either international lenders, or the bond markets, and events in the two nations highlighted the growing European backlash against the politics of austerity. In Greece, where political leaders are seeking to negotiate a new round of cuts to placate their creditors, flights and trains were suspended, and schools and shops closed, as the country prepared for the first big anti-austerity strike since a new coalition government took power in June. In Spain, police said 38 people were arrested and 64 people injured during protests Tuesday to protest against spending cutbacks and tax hikes, The Associated Press reported from Madrid. Several thousand people had converged on the Spanish Parliament where clashes followed with more than 1,000 riot police. Police baton-charged protesters and some demonstrators broke down barricades and threw rocks and bottles. –NY Times