Greek officials will hold emergency talks with France, Germany, the European Central Bank and the International Monetary Fund after announcing that it will be pressing ahead with its shocking call for a referendum on the EU’s hard-fought bailout package which was designed specifically to reduce Athens’ colossal debt pile. Prime Minister George Papandreou bewildered European leaders with his decision to let the people of Greece decide on the country’s economic fate which may well lead to a collapse; bankruptcy; an exit from the euro, and potentially another catastrophic financial meltdown. Leading stock indices in France and Germany plunged another five per cent, driven by fear, while the euro stumbled to multi-week lows against both the pound and US dollar. Sterling advanced despite another dreadful reading on UK manufacturing activity in October while the dollar continued to benefit from risk averse. Troubles in Greece are now weighing heavily on Italy after yields on its bonds highlighted a rapid deterioration in confidence.

Sterling

Sterling edged closer to 1-month highs against the under-pressure euro after the Greek referendum issue. Investors are again scrambling for assets offering any type of protection since a potential no vote in Athens could be seen as a declaration of bankruptcy, of which the consequences are unimaginable for the euro. The pound did fall against the US dollar though following the release of October’s CIPS UK manufacturing PMI which fell at its sharpest pace in 2-years.

US dollar

Following on from dreadfully weaker manufacturing data from China, the negative ISMUS manufacturing PMI for the month of October also caught investors off guard, while markets were holding out for a healthy expansion to around the 52 mark. There were still signs indicating steady growth in the sector however the gauge did little to dispel global growth concerns, thus encouraging even more risk averse behaviour.

Euro

French President Nicolas Sarkozy, and German Chancellor Angela Merkel, moved quickly to calm investors after Greece threw Europe’s new debt-busting master plan into chaos by calling for a referendum on its bailout. Prime Minister George Papandreou’s coalition will also face a vote of no confidence this week and the political instability has gone some way towards erasing any hope markets had of an end to Europe’s fiscal catastrophe.

Japanese yen

The Bank of Japan has re-opened emergency lending facilities to commercial banks for the first time since mid-2010 as Europe’s deepening debt crisis threatens banking operations across the globe.

Travelex Global Business Payments Malta, freephone: 800 733 22, www.travelex.com/mt/

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