Stocks Extend Plunge On Concerns About Greece

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Fears that Greece's debt problems could halt the global economic recovery have sent stocks into a nosedive.

At one point the Dow Jones industrial average was down almost 1,000 points, before recovering.

Computer selling intensified the selling as investors watched protests in the streets of Athens on TV. Fears are running high in the financial markets that the Greek government will not be able to implement austerity measures that would enable it to contain its debt problems. And, in turn, that the country's problems will hurt other economies in Europe and perhaps the U.S.

The Dow's gyrations showed the high emotions in the markets. Down 998.50 points in mid-afternoon, it recovered minutes later to a loss of fewer than 400 points.

With protests in Athens against new austerity measures culminating Wednesday in the death of three people, markets are worried that Greece could fall out of control or that its fiscal problems could affect other weak countries such as Portugal and Spain.

There were hopes that the European Central Bank would announce new measures — such as buying government bonds — to ease the debt crisis engulfing the eurozone but none were forthcoming.

Instead, Jean-Claude Trichet put the blame for the crisis firmly on the shoulders of Europe's governments for tolerating lax budgetary controls for years - and before the financial crisis exploded in late 2007.

Greek police fired tear gas to repel stone-throwing protesters after lawmakers approved drastic austerity cuts Thursday needed to secure international rescue loans worth euro110 billion ($140 billion). The clashes followed violent street protests Wednesday that left three people dead after a bank was firebombed.

Greek lawmakers voted 172-121 to approve the austerity measures - worth about euro30 billion ($38.18 billion) through 2012 - that will slash pensions and civil servants' pay and further hike consumer taxes.

The rescue loans are aimed at containing the debt crisis and keeping Greece's troubles from spreading to other countries with vulnerable state finances such as Portugal and Spain. The money will come from the International Monetary Fund and the 15 other governments whose countries use the euro.

European governments are now scrambling to get parliamentary approval for the Greek loans. European leaders will meet on the issue in Brussels on Friday.

Fears of Greek default have undermined the euro, and while the current package should keep Greece from immediate bankruptcy, its long-term prospects are unclear. The country's growth prospects are weak, and the population's willingness to accept cutbacks may wane, leading some economists to predict an eventual debt restructuring somewhere down the road.

This program aired on May 6, 2010. The audio for this program is not available.