Greece Misses Deficit Targets; European Banks Drop

Arthi Gupta
03 Oct, 2011
New York City

European indexes slumped after Greece announced new austerity measures and its inability to meet the deficit reduction targets for 2011 and 2012. Denmark

[R]2:30 PM Frankfurt – European indexes slumped after Greece announced new austerity measures and its inability to meet the deficit reduction targets for 2011 and 2012. Denmark’s first woman prime minister agreed to form coalition government. Austria passed bailout fund. Euro-zone factory activity declined in September.[/R]

European indexes dropped after the Greek finance ministry on Sunday conceded that the government will not be able to meet the deficit reduction targets imposed by the European Union and the International Monetary Fund for this year and the next.

In 2011, the country''s budget shortfall is estimated at 8.5% of the gross domestic product, above the 7.6% target set by the international lenders. The deficit will be reduced to 6.8% of GDP in 2012, but still short of the 6.5% target.

Greece also imposed €6.6 billion in new austerity measures, including a ''labor reserve'' plan that would see 30,000 public sector workers either laid off or given reduced pay. The plan would save the government about €300 million from the public sector wage bill in 2012.

The European Finance ministers are scheduled to meet in Luxembourg today to discuss the debt crisis and discuss options for leveraging the European Financial Stability Facility. Greece needs €8 billion or $11 billion tranche of the €110 billion rescue loan, as its cash reserves are likely to be exhausted by mid-October.

Austria is the latest euro-zone country to approve the region''s strengthened bailout fund, approving it by 117 to 53 votes. The vote meant that Austria agreed to raise its share of the bailout to €21.6 billion, from €12.2 billion.

Denmark’s first woman prime minister, Helle Thorning-Schmidt agreed to form a three-party center-left coalition government on Monday.

China''s purchasing managers'' index for the non-manufacturing sector rose 1.7 points from a month earlier to 59.3 in September, survey results from the China Federation of Logistics and Purchasing showed.

In Paris, CAC-40 Index slumped 57.92 or 1.9% to 2,924.04 and in Frankfurt DAX Index edged lower 121.35 or 2.2% to 5,380.67.

Banks led the decliners on the worries that financial losses from Greek troubles will increase.

BNP Paribas slumped 5.7% to €28.33, Societe Generale fell 4.9% to €19.02, and Deutsche Bank declined 2.6% to €25.65.

Euro-zone Factory Activity Drops

Euro-zone factory activity declined in September, final results of a survey by Markit Economics showed today. The final reading of the purchasing managers'' index for the manufacturing sector was a 25-month low of 48.5 in September, above the flash estimate of 48.4.

Elekta Divests Anatomic Pathology Information System

Elekta AB divested its Anatomic Pathology Information System business, marketed under the brand name PowerPath, a software line that manages workflow for laboratories offering surgical pathology, cytology, dermatopathology and autopsy services.

The consideration amounts to SEK 225 million, through an asset purchase structure on a cash and debt-free basis. The buyer is Sunquest Information Systems, Inc., a U.S.-based company providing closely related diagnostic IT solutions.

Gainers & Losers

AMEC Plc fell 2.9% to 792 pence after the British engineering and project management contractor received an engineering contract valued at an estimated £50 million, for GDF SUEZ E&P UK Ltd''s Cygnus gas field development in the North Sea.

Heliocentris Energy Solutions AG rose 2% to €5.50 after the specialist in clean energy storage solutions said its first-half operating loss widened 74% to €2.784 million from €1.60 million last year.

Imtech NV fell 0.7% to €21.10 after the technical services provider said it is acquiring the Austrian ICT company Comnet to strengthen its position in the Austrian ICT market. The acquisition will be paid in cash and will directly contribute to earnings per share.

Metso Corp. slid 1.7% to €21.77 after the technology company said it signed an extensive frame agreement with Neste Oil Corp. for automation and safety system replacement deliveries and services over the years of 2012 - 2016.

net mobile AG slumped 3.3% to €6.794 after the mobile telecommunications services company said sales rose 3.4% for the first six months of 2011 despite the challenging market environment.