European stocks drop as fears over Greek debt default increase; three French banks at risk of being downgraded by credit agency Moody's; violent clashes between Christians and Muslims in Indonesia; China's trade surplus at $17.8 billion for August; South African youth league leader guilty of hate speech; US marks 10th anniversary of 9/11 attacks; and more

Top of the Agenda: Eurozone Debt Crisis Threatens Global Economy

European stocks--and the euro--dropped sharply Monday as investor fears (WSJ) over a potential Greek default intensified. Concerns also accelerated over sovereign debt contagion to the European banking sector.

French banks hold the most exposure to Greek debt (NYT) in Europe. BNP Paribas, Société Générale, and Crédit Agricole are all at risk of being downgraded by credit rating agency Moody's. The U.S. financial system is also at risk, despite recent moves by U.S. lenders to curb their exposure to French banks.

Despite last year's $152 billion EU-IMF Greek bailout and a second rescue package agreed upon this summer, global investors are again worried that Greece may not meet its debt obligations. The Greek government moved Sunday to calm the situation by implementing a two-year property tax increase (FT), which will close a large budget gap and allow the country to receive the next installment of its first bailout.

Still, many EU officials, particularly in Germany, have become increasingly convinced that Greece may have no choice but to default (DerSpiegel) and leave the eurozone.

Analysis

Berlin is abuzz with talk of remaking the European Union: issuing joint Eurobonds, renegotiating the EU's treaties, even creating a federal Europe, says the Economist.

Sharp new fears of an escalation in eurozone debt troubles have intensified debate over whether to spur fiscal integration or risk a wider crisis with serious consequences for U.S. financial markets, experts say in this CFR Analysis Brief.

The eurozone, once seen as a crowning achievement in the decades-long path of European integration, is buffeted by a sovereign debt crisis of nations whose membership in the currency union has been poorly policed, explains this CFR Backgrounder.

 

PACIFIC RIM

Sectarian Violence in Indonesia

The Indonesian government deployed hundreds of troops to the city of Ambon, on the Molucca islands, following a revival of violent clashes between Christians and Muslims (BBC) that killed five people and injured at least eighty.

CHINA: The country's trade surplus for August, at $17.8 billion, is reigniting international calls for China to allow the yuan to appreciate (FT) amid weakening growth prospects for the global economy.

 

ELSEWHERE:

South African youth league leader guilty of hate speech against Afrikaners

US marks 10th anniversary of 9/11 attacks

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.