Triple blow to eurozone hopes

Three new developments have put huge pressure on EU governments to come to a unanimous decision at the two-day debt summit on Thursday and Friday.

Cyprus became the fifth eurozone country to ask for a bailout to help its banks yesterday, after announcing it has only four days to find €1.8bn to protect its second-largest bank, Cyprus Popular Bank, which is heavily exposed to the Greek financial system.

The Cypriot government said it required assistance after “negative effects from Greece had spilled over in to its economy.” While they did not give a specific amount, AFP has reported local media are estimating they will ask for around €5bn.

Meanwhile, credit ratings agency Moody’s has downgraded the ratings of 28 Spanish banks, as the Spanish government formally asked the EU for €100bn to rescue their ailing industry. A full bailout is likely to hinder rescue plans for Greece, Portugal and Ireland and put serious pressure on EU financial resources.

Asian markets announced they had been affected by the demotions this morning, with Tokyo, Seoul and Shanghai all reporting drops in their share indices.

The new coalition government plans in Greece have suffered major setbacks today, following the announcement the new finance minister Vassilis Rapanos, chairman of the National Bank of Greece, has resigned due to ill-health. He was rushed to hospital three days ago after complaining of nausea and abdominal pain. The new Prime Minister Antonis Samaras has also been out of action, after recovering from surgery to repair a damaged retina.

Debt inspectors will now delay a trip to Athens and any major decisions made this week to fix the crumbling currency may not include Greece at this time.

Shares in Spanish, Italian and Greek bonds fell sharply yesterday, with Spanish and Italian markets closing over four percent down, as investors worry no deal will be made to safeguard the euro.

Tim Waterer, senior trader at CMC Markets in Sydney, said expectations were very low. “There is a feeling that nothing concrete is going to come out of the summit and we will be none the wiser about the solution to long-term problems,” he told Dow Jones Newswires.