ECB governing council warned of a “Massive Shock”

Greece’s Athex Composite has plummeted to a new 22-year low, over heightened fears of an economic collapse. The Athens’ stock exchange, closed down 24 points at 503, a drop of 4.53% overnight.

Uncertainty in Greece has intensified despite EU leaders pledging support for the country, because no new measures have been announced yet to avoid a currency exit.

It’s basically a continuation of the same theme, they’re not feeling reassured that European leaders have got it covered.

However the rest of Europe saw gains despite Greece’s fall, with the German, British and French stock exchange all on the up.

Overnight London’s FTSE 100 was up 84 points, Germany’s DAX up 30, and the French markets up 35 points.

Shortly after an EU summit failed to produce a remedy, a May survey of eurozone business confidence showed the sharpest monthly fall for nearly three years while the data for Germany was the worst for six months and a survey in France, the poorest for 37 months.

European Central Bank President Mario Draghi said the EU was at “a crucial moment in its history” and that the debt crisis has demonstrated the EU’s weaknesses.

“The process of European integration needs a courageous jump in political imagination to survive,” he said, adding that while growth was a priority, “there is no sustainable growth without ordered public accounts.”

ECB governing council member Ewald Nowotny warned of a “massive shock” of unknown consequences if Greece should stumble back to the drachma and cautioned against taking the possibility too lightly.

Amid the strain, the euro slumped to a 22-month dollar low of $1.2516, but Europe’s stock markets staged a technical bounce after heavy losses on Wednesday despite a slew of bad news on the economy.

“Unless policymakers come up with radical new solutions … they will soon be faced with the prospect of delivering closer fiscal integration or overseeing the breakup of the euro,” he said.

If Greeks vote in new elections on June 17 for parties against the budget cuts and reforms tied to a second debt rescue, the EU, International Monetary Fund and ECB are expected to cut their financial lifeline.

That would in effect force Greece out of the eurozone and could cause incalculable risks for other weaker members, notably Spain.

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