Oct.03 - European shares fell sharply on Monday morning after Greece's draft budget figures showed it would miss its deficit targets this year and next, which could lead it to ask for more bailout funds from its international lenders. Joanna Partridge reports.
It's hardly a good start to the final quarter of the year - European stocks slid on Monday morning after draft budget figures showed Greece would miss its deficit targets this year and next. It means Greece might need to ask for more bailout funds from its international lenders and the news will probably make investors shy away from riskier assets says David Jones, Chief Market Strategist at IG Index. SOUNDBITE: David Jones, IG Index, saying (English): "As we've seen all the way through this European debt crisis, the concern is that there's an awful lot of talk from politicians and central banks to an extent, and very little in the way of immediate action. So I think the worry is that once again this latest problem will extend how long it takes to try and solve." Stocks also fell sharply in Athens on the news - with bank shares leading the slide. Athens-based analyst Nikos Christodoulou says Greece is struggling to meet the 2012 target due to tax evasion, and delays in public sector reforms. SOUNDBITE: Nikos Christodoulou, Analyst at Merit Securities, saying (English): "The new target is 8.5 percent, this is a significant devation from the originally target which was 7.6 percent. The main reason is the recession, the recession widens in Greece at this moment, we know that it will be at least 5.5 percent, for this year and we may have a new recession in the next year, so the bigger the recession the higher the budget deficit." The Greek forecast comes as inspectors from the EU, IMF and European Central Bank, examine the country's finances. The so-called troika are in Athens deciding whether Greece should receive the next 8 billion euro instalment of a bailout it needs to avoid bankruptcy this month. Greece's failure to meet this year's deficit target means that recent additional austerity measures aren't enough to put its finances back on track. On Sunday, the cabinet announced a particularly unpopular plan to reduce the pay of 30,000 state workers by 60% and allow them to be dismissed after a year. Critics say the measure won't save as much as expected as about two-thirds of the workers are due to retire soon anyway. Joanna Partridge, Reuters