European Stocks Down on Greek Austerity

Austerity in Greece has dragged stocks lower as Greek Prime Minister Lucas Papademos agrees with political leaders in his country to cut government costs in accordance with the wishes of foreign creditors. The deal should be worth €130 billion (about $171 billion) for the Greek government. According to the agreement, which is still in its early stages and not complete, the country will reduce its budget by 1.5% of the country's GDP in one of the biggest austerity moves to come from a PIIGS economy in recent memory. The austerity measures include wage reductions for public workers and efforts to make the country more competitive for foreign direct investment. Pensions and bank recapitazliations are also issues of focus for the new agreement. That amount is a fraction of the country's total credit obligations abroad. Stocks fell in European markets as the deadline for Greek debt looms. Credit Agricole ACA fell by 4% in morning trading, and Societé Generale GLE was not far behind with a loss of 3.81%. Most other European banks are down on the news, while futures on the S&P 500 were down slightly. The early-morning fall continues the protracted volatility that has plagued Europe for over a year, as sovereign debt remains an uncertain and sensitive point for European economies. The internal agreement between Papademos and Greek leaders is tentative, so investors may be worrying that the deal will fall through.