Italian stocks slumped the most in three years as Greek Prime Minister George Papandreou’s call for a referendum on the European Union’s rescue agreement raised concern that efforts to avoid a default will be derailed.
The benchmark FTSE MIB Index lost 1,089.49, or 6.8 percent, to 14,928.24 at the close of trading in Milan, the largest decline since October 2008. The gauge has retreated 26 percent this year. Intesa Sanpaolo tumbled 16 percent to 1.09 euros and UniCredit SpA sank 12 percent to 74.3 euro cents as banks paced the selloff.
“The move by the Greek prime minster to hold a referendum on the EU bailout deal was a real surprise,” said Joshua Raymond, a London-based market strategist at City Index Ltd. “Given the public antipathy towards the austerity plans and the fact that the government has such a low approval rating, one questions where the public support for the package will come from and where that will leave Greece.”
Papandreou’s gambit risks pushing the country into default if voters reject the financial accord. An opinion poll published on Oct. 29 showed most Greeks believe the euro area’s expanded bailout package and debt writedown are negative.
Leaders from the Group of 20 meet at a summit on Nov. 3-4 in Cannes, France, a week after the euro area’s authorities pledged to expand their rescue fund to 1 trillion euros ($1.4 trillion). They have already sought financial help from China and cooperation from the International Monetary Fund.