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Stocks pare losses amid doubts on Greek referendum

November 1, 2011 | 11:46 am

U.S. stocks and the euro currency rallied off their lows on Tuesday, after news reports from Greece suggested that the prime minister's proposal for a referendum on the Eurozone bailout won't pass parliament.

The Dow Jones industrial average was off 190 points, or 1.6%, to 11,765 at about 11:45 a.m. PDT, after being down as much as 321 points earlier.

The euro was at $1.374, down 0.9% from $1.386 on Monday but up from a low of $1.361 Tuesday morning.

Greek Prime Minister George Papandreou announced late Monday that he wanted a national referendum on the terms of Greece’s bailout package from the rest of Europe.

The move was a shock because a thumbs-down by austerity-weary Greek voters could mean the end of Greece’s membership in the Eurozone -- and a disastrous default on all of the country’s heavy debt obligations to the rest of the continent.

But Socialist lawmakers in Athens on Tuesday said they opposed the idea of a referendum, raising doubts that it could get through parliament.

Whether Papandreou’s government will survive, however, remains a critical question. If the government  falls the Eurozone’s rescue plan might still be thrown into doubt.

In European trading Tuesday, Papandreou’s announcement triggered yet another a mini-crash in equity markets, with Italian stocks diving 6.8%, the French market losing 5.4% and the Spanish market sliding 4.2%.

Yields on Italian government bonds jumped again, with the 10-year bond yield rising to 6.19%, up from 6.09% on Monday and nearing a new 52-week high. Rising Italian yields show investors are increasingly doubtful about the broader financial rescue plan that European leaders approved last Thursday.


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-- Tom Petruno

Photo: A German stock trader in Frankfurt on Tuesday. The German market plunged 5% on fears that Greece's financial bailout could unravel. Credit: Michael Probst / Associated Press