Wednesday: Markets Tumble Amid Debt Fears; Officials May Ignite Gulf Oil Spill

BY Hari Sreenivasan  April 28, 2010 at 8:51 AM EDT

Tokyo

A man looks at a stock indicator in Tokyo on Wednesday. The Nikkei index of the Tokyo Stock Exchange finished the morning session down 276.67 points — 2.47 percent. (Photo by Toshifumi Kitamura/AFP/Getty Images.)

Global markets took a beating for a second straight day on fears that Greece’s spiraling debt crisis may spread to other nations across Europe.

Stocks in Asia and Europe slid by more than 2 percent in Wednesday trading, one day after a leading credit rating agency, Standard & Poors, downgraded Greece’s debt to junk status. The agency also cut its valuation of Portugal by two notches, signaling to investors that the nation is now increasingly unable to pay off its debt.

The downgrades have heightened investor worries that European Union and International Monetary Fund officials will be able to contain the crisis. Greece has formally requested some 45 billion euros in financial assistance from the EU and IMF, but the aid package still requires the approval of lawmakers in Europe.

One of the biggest obstacles to the aid has been resistance from Germany, but on Wednesday a spokeswoman for the German finance ministry told the Associated Press that it could approve aid for Greece as early as May 7. Meantime, a Greek official told the Wall Street Journal that the IMF is considering increasing its 15 billion euro pledge by as much as 10 billion euros.

Yet even with the promise of aid, “This is very significant for a variety of parties,” Cornell University’s Eswar Prasad told Gwen Ifill on Tuesday’s NewsHour:

“First of all, it’s very significant for Greece, because it means that they’re going to have a great deal of trouble refinancing their debt….It’s going to reverberate in the rest of Europe as well, because there are countries that are equally vulnerable, countries like Portugal and Spain, that are going to come under a lot of pressure.”

Coast Guard Weighs Lighting Oil Spill on Fire

With emergency response teams struggling to contain an oil leak pouring into the Gulf of Mexico at a rate of 42,000 gallons a day, officials are considering conducting a “controlled burn” of the petroleum as early as Wednesday.

The oil slick, which is some 100 miles wide and 45 miles long, has now crept to within 20 miles of the Louisiana coastline. Igniting the oil could burn off between 50 percent to 95 percent of the oil on the water’s surface. If the leak isn’t contained soon, it has the potential to become “one of the most significant oil spills in U.S. history,” U.S. Coast Guard Rear Adm. Mary Landry told the New Orleans Times-Picayune.

The leak was discovered Saturday, days after an explosion on a BP rig left 11 workers missing and presumed dead.

The spill is also complicating the fragile drive in the U.S. Senate to pass climate change legislation that includes expanding areas for off-shore drilling. Several lawmakers have “said they were troubled by the accident and might not support broad climate and energy legislation if it contains expanding drilling without adequate safeguards,” reports the New York Times.