(Greek protests slide show updated for Thursday events)
ATHENS, Greece -- (TheStreet) -- The economic unrest in Europe reached a new level on Wednesday, with violent protests on the streets of Athens, and reports of three fatalities. The market fallout from Wednesday violence continued on Thursday, as equities around the globe traded on fear.
The daily turns of trading euphoria followed by trading agony, and stemming from the outlook for a European Union bailout package for Greece, seem minor in comparison to people dying on the streets.
Television screens were filled with images of protesters in the streets of Athens and around Greece on Wednesday morning. The fatalities reportedly occurred after angry Greek youths set fire to a bank building associated with Greece's Marfin Bank.
Greek workers had begun their two-day strike on Tuesday. Greek Prime Minister George Papandreou has been trying to persuade labor unions to accept further austerity measures as the European Union works to finish a bailout package to avoid a Greek bond default. An estimated 100,000 people took to the streets Wednesday.
The Greek budget deficit had soared to 13.6% of GDP in 2009, four times above the maximum threshold allowed by EU rules.
The euro traded below $1.28 on Thursday for the first time since March 2009.
European equities markets and Asian markets were also down on Thursday as the European debt crisis dominated investor sentiment across the globe.
Greek's parliament was under storm by protesters on Wednesday, and a barrage of paving stones, rocks and gasoline bombs hurled by the angry mobs was answered by tear gas from the police standing behind riot shields.
The euro's new low on Thursday morning followed a 14-month low reached against the dollar at $1.28 on Wednesday, and was the third consecutive day that the euro was below the psychological threshold of $1.30.
One day, a bailout package is a "sure thing" and fears that Europe is sinking deeper into its debt mess ease. The next day, political resistance makes a bailout package for Greece look "unlikely" and sends the markets tumbling. Greek labor unions balk at a bailout; German politicians dilly-dally on their big role in approving a bailout based on domestic political pressures; and some market economists argue in favor of allowing Greece to default rather than seeing through an expensive bailout package.
Last Wednesday, the day before a big market rally as a bailout package looked set, the markets also lost $1 trillion in value.
Covering the Greek debt crisis and the slide in the euro in 2010 has been like monitoring a schizophrenic's state of mind from minute to minute. When the Spanish prime minister said on Tuesday that rumors of Spain's demise were "complete madness" he picked the right term to describe the situation in Europe.
And, of course, there was the looming question on everyone's mind:
Will the Euro collapse in 2010?
The slide in the euro, which had lost more than 10% against the dollar this year, continued on Tuesday and Wednesday. Institutional investors sold euros this month at the fastest pace since the second half of 2008, when the euro fell more than 25% versus the dollar, according to Bank of New York Mellon data.
Noted market prognosticator Nouriel Roubini, for example, told
last week that Greece "could eventually be forced to get out" of the European Union, which would put more pressure on the euro.
Greece's Parliament began debating the austerity measures required for the European Union and International Monetary Fund bailout package on Thursday. The Greek government was sticking to its guns even after the protests on Wednesday and the fatalities, with Finance Minister George Papaconstantinou telling his government that the wage and pension cuts required for the bailout are necessary to avoid a default.
The central Sintagma Square in front of the Greek Parliament was clouded in tear gas on Wednesday.
Greek firefighters extinguished two buildings that were on fire on Wednesday, as protesters set fire to cars and even a fire truck. The general strike shut down flights, schools and hospitals across Athens.
reported watching youths set fire to the Marfin Bank building as firefighters attempted to rescue those trapped inside. Four people were injured in the fire, beyond the three fatalities.
Greek Prime Minister George Papandreou said in a statement on Wednesday that, "Everyone has the right to protest. But no one has the right to violence and especially violence that leads to the death of our compatriots."
The terms of the Greek bailout package would require Greece to slash public-sector wages, cut pensions, freeze pay and loosen its labor laws. Greece has also pledged to raise its top tax rate to 23%, and add taxes for fuel, tobacco and alcohol.
Greek fire department officials said that 8 fires in Athens office buildings and bank buildings had been brought under control on Wednesday.Athens police swept through an anarchist stronghold, Exarhia, on Wednesday, arresting 25 and detaining 70, according to a police statement. A total of 41 officers were injured in yesterday's protests, according to the statement.
More protest activity was planned for Thursday, with Greece's two biggest labor groups scheduled to lead protests outside parliament in the evening.
"In less than two weeks, a 9 billion-euro bond comes due and the state coffers don't have this money.... As we speak today the country can't borrow it from foreign markets and the only way to avoid bankruptcy and a halt on payments is to get this money from our European partners and the IMF," Finance Minister George Papaconstantinou said.
The Greek Finance minister added, "We are asking for loans from countries that also have deficits. We are asking for loans from countries that are also under speculative attack. And to be able to secure them, we must convince them that we are putting our house in order as well."
Even though the crisis in Europe took its most violent turn on Wednesday, the crests of optimism in the markets, followed by fears of the economic apocalypse, have typified the situation in Europe since the beginning of the year.
Late last week, the markets rallied as a European bailout of Greece seemed close at hand.
This week's major market selloff
-- $1.1 trillion was lopped off the equity markets on Tuesday -- occurred after a weekend bailout package had been announced. The European Union and the International Monetary Fund had agreed to a $145 billion bailout package over the weekend, but investors remain skeptical.
The MSCI World Index saw all of its 2010 gains wiped out on Tuesday.
The level of hysteria about European debt is not unfounded, as the entire European banking systems is intricately linked to Greece, Spain and Portugal.
In fact, European banks have more at-risk assets in Portugal and Spain than in Greece. European lenders are holding Portugal debt issues of $240.5 billion -- including $47.4 billion by German banks and $44.9 billion by French firms, according to
Bank for International Settlements
figures from the end of 2009, quoted in a Bloomberg report.
European bank exposure to Spanish debt stands at $832.3 billion.
European Central Bank council member Axel Weber reiterated the threat of a "grave contagion" on Wednesday.
Of course, the European debt Chicken Littles have been crying economic apocalypse for weeks, if not months.
Nouriel Roubini -- who predicted the U.S. recession a year ahead of its actual occurrence -- stoked fears of a global contagion stemming from the European debt crisis last week at the Milken Institute Global Conference, saying, "Greece is just the tip of the iceberg, or the canary in the coal mine, for a much broader range of fiscal problems."
By Tuesday, the fears about Greece's woes were really fears about all of Europe, and the rating agencies have helped to stoke fears about the sovereign debt crisis in Greece extending well beyond Athens.
A European debt contagion, or an "European economic ebola virus" is now the amorphous market villain.
Is it Spain or Portugal next on deck to wreak havoc with the markets by way of their debt?
Maybe it's to be
Spain and Portugal that continue to make mincemeat of market confidence.
Standard & Poor's cut Greece's credit rating below investment grade last Tuesday, and lowered Portugal's credit rating also. Last Wednesday, S&P downgraded Spain's debt.
On Wednesday morning, Moody's Investor Service said that it had put Portugal on watch for a potential debt downgrade -- a process that could take up to three months to lead to an actual downgrade of one or two notches.
"Although Moody's believes that Greece faces far more serious fiscal difficulties than Portugal, the rating agency nevertheless sees an extended period of retrenchment for Portugal as inevitable until the country's domestic financial imbalances are corrected," the rating agency wrote.
Moody's went further on Thursday morning in raising the fears of a European debt contagion, writing in a report that Europe's fiscal crisis could threaten banks in Portugal, Spain, Italy, Ireland and the U.K. "Overall, Moody's notes that each of these countries' banking systems faces different challenges of different magnitudes, but warns that contagion risk could dilute these differences and impose very real, common threats on all of them," the Moody's report said.
French banks have the greatest exposure to Greek debt among European lenders, according to the Bank for International Settlements -- $78.8 billion of the $193.1 billion of total claims European banks have on Greece.
France's banking sector has the second-largest exposure to Portugal and Spain debt loads, after Germany, according to the BIS.
Is there anything to buy amid the noise, not even to mention the human toll, coming out of Europe?
Of course, market strategists are immune to social unrest like the protests in Greece as anything other than another way to scour for buying opportunities in the market.
Short-term fortunes have probably been amassed by the most risk-tolerant short-term traders in wild shares like the
National Bank of Greece
For exchange-trade fund enthusiasts, there is the ProFunds UltraShort Euro ETF.
Credit Suisse Group strategists saw through the violence on the streets of Athens to recommend investors buy stocks that will benefit from a weak euro and increasing German inflation, including German carmakers, engineering companies like
Credit Suisse also recommended real-estate stocks in Germany that will benefit from inflation. "We would focus on cheap exporters with transactional exposure as well as buying those companies who will eventually benefit from much greater German reflation," the Credit Suisse strategists in London wrote on Wednesday.
Where will the European debt crisis end?
There will be an EU summit in Brussels on Friday to work on the details of activating the Greek bailout package.
The IMF was headed for a Sunday vote on its portion of the Greek bailout package, while Spain's Prime Minister made his "complete madness " comment on Tuesday in response to rumors that Spain would be the next indebted European nation asking for support.
Yet this isn't the first time, or the second or third time, that we've been told the European debt crisis is either nearing an end or overstated.
Barclays Capital wrote in a report last Thursday, "We believe the move toward a Greek rescue package will remain a slow grind and a weight on the euro," and the securities firm specifically cited the political situation in Germany as a reason to expect more ups and downs in the outlook on a resolution to the Greek debt crisis.
As the striking in Greece began, German Chancellor Angela Merkel told her government before its vote on 22 billion euros in aid to Greece, that the vote was "about nothing less than the future of Europe and the future of Germany in Europe."
-- Reported by Eric Rosenbaum in New York.
Follow TheStreet.com on
and become a fan on
Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.