- City suspends liquor license for downtown Cape bar; owners say they want to fix problems (3/26/17)3
- Mall aboard: Future requires evolution at West Park Mall (3/24/17)23
- Legal discrimination complaint, ethics complaint filed in Scott City government (3/22/17)13
- Business notebook: Cape native goes from farm to mobile-food operation (3/20/17)1
- Former Southeast softball coach sues Board of Regents; seeks damages and her job back (3/23/17)15
- Former Scott City administrator: 'I was forced to resign' (3/21/17)6
- Triplett manslaughter case set for July 2018 (3/21/17)2
- Two people found dead in Advance house fire (3/21/17)
- Two Cape men charged with second-degree murder of Grandi (3/21/17)2
- Two local lawmakers back charter school bill; Perryville lawmaker objects to measure (3/19/17)24
Greek debt crisis spreads to Portugal
ATHENS -- Stocks around the world tanked after ratings agency Standard & Poor's on Tuesday downgraded Greek bonds to junk status and downgraded Portugese bonds two notches, showing investors that Greece's financial contagion is spreading.
Major European exchanges fell more than 2.5 percent, and on Wall Street, the Dow Jones industrial average finished down 213 points, or 1.9 percent. The euro slid more than 1 percent to nearly an eight-month low.
Asian stock markets tumbled in early trading Wednesday. Japan's Nikkei 225 stock average shed 2.8 percent to 10,897.72, and South Korea's Kospi lost 1.6 percent to 1,722.03. Australia's benchmark retreated 1.8 percent to 4,792.90.
"We have the makings of a market crisis here," said Neil Mackinnon, global macro strategist at VTB Capital.
Greece is struggling with massive debt, and with prospects for economic growth weak it could end up in default. Its 15 eurozone partners and the International Monetary Fund have tried to calm the markets with a euro45 billion rescue package, but it hasn't worked.
Standard & Poor's warned that holders of Greek debt could take large losses in any restructuring, but a greater worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone.
One bailout can be dealt with but two will be stretching it, and there are fears that other weak economies could be pulled down in the Greek spiral -- including Europe's fifth-largest, Spain. Can Germany, Europe's effective paymaster, continue to bail out the weaker members of the eurozone?
The crisis threatens to undermine the euro and make it harder and more expensive for all eurozone governments to borrow money.
It has also disrupted cooperation between eurozone governments, with Germany resisting the idea of bailing out Greece unless strict conditions are met.
Many investors think Greece will have enough money to avoid default in the coming weeks, but the future is cloudier.
Both Standard & Poor's and the Greek finance ministry insisted that the country will have enough money to make the euro8.5 billion bond payments due on May 19.
Even if it does, Greece faces years of austerity with living standards sharply reduced. Standard & Poor's warned that the Greek economy was unlikely to be as big as it was in 2008 for another decade.
Junk status sinks Greece's hopes even deeper. Losing investment-grade status for its bonds means that Greece will have to pay higher costs to borrow if it taps debt markets again, and increases the chances that existing debt will have to be restructured.
"The latest developments mean that the chances of Greece solving this situation without restructuring its debts are now dim," said Diego Iscaro, senior economist at IHS Global Insight.
German Chancellor Angela Merkel reiterated her position that Greece should first conclude the current negotiations with the IMF and the European Union about austerity measures for the coming years before receiving the international loan package.
Speaking at an election rally Tuesday afternoon, Merkel said it is appropriate to tell Greeks, "You have to economize, you have to become fair, you have to be honest; if not, nobody can help you," according to the German news agency DAPD.
A government spokesman said Tuesday evening he could not tell if Merkel was at that point aware of the latest downgrade. He declined to be named in line with government policy.
The FTSE 100 index of leading British shares closed down 2.6 percent, Germany's DAX slid 2.7 percent and the French CAC-40 in France ended 3.8 percent lower.
Greek and Portuguese stocks were pounded -- down 6.7 percent and 5.4 percent, respectively -- while their market borrowing costs went through the roof. The interest rate for Greek two-year bonds jumped to a massive 18 percent.
The interest rate gap, or spread, between Portugese and benchmark German 10-year bonds rose about half a percentage point Tuesday to reach its highest point since the euro came into circulation. The higher the gap, the less confidence in Portugal; its bonds on Tuesday had an interest rate 5.86 percentage points higher than German bonds.
Both the Portugese and Greek governments have imposed budget cutbacks against political resistance from unions at home. Markets have been skeptical that they can push through enough cuts, given political resistance, to put their finances in order.
Both governments responded with alarm at the downgrades.
"This decision will not help markets to calm down, but will, on the contrary, contribute for their turbulence," Portugese Finance Minister Fernando Teixeira dos Santos said.
Greek Finance Minister George Papaconstantinou said the downgrade "does not reflect the real state of our economy, nor the fiscal situation, nor the ongoing negotiations which have the very realistic prospects that they will be completed successfully in the next few days."
Papaconstantinou said Greece will pull through.
"One wishes that Europe had acted a little differently. Three and four months ago we were saying that the mechanism must be ready and it must be detailed, that the markets must know what exactly is going. Unfortunately, for a series of political reasons, we are down to the wire," he said.
The crisis has highlighted the eurozone's inability to keep governments from undermining the euro by running up big debts. Rules that limit deficits to 3 percent of gross domestic product have been widely flouted, and EU officials are talking about ways to strengthen them.
AP Business Writer Pan Pylas contributed from London.