EU debt crisis hits world markets

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The FTSE 100 Index was 2 points lower at 5,879

Markets across the world have faltered as a sharp downgrade of Ireland’s credit rating and concerns over other EU countries’ debt spooked investors.

The FTSE 100 was 2 points lower at 5,879, while Germany’s DAX was down 0.2%. The CAC-40 in France shed 0.4%.

Wall Street followed European markets lower shortly after opening – the Dow Jones Industrial Average was 0.2% lower and the Standard & Poor’s 500 was down less than 0.1%.

Ireland’s credit rating was slashed from Aa2 to Baa1 by key agency Moody’s, while Greece had its already low rating placed on review for a further downgrade.

The report comes after a similar move earlier this week to place Spain’s debt on review.

The euro-related misery continued as Lloyds issued a warning over the impact that Ireland’s debt crisis will have on its performance this year.

The part-nationalised bank announced it will have to write off more of its £26.7 billion portfolio of loans in the country due to the deteriorating economic situation in the recently bailed out country.

Shares slumped 2.6p to 66.3p after the bank said it expects bad debt losses of £4.3 billion this year, compared with the £1.6 billion reported in June.

EU leaders revised the Lisbon treaty at a summit in Brussels in a move to calm financial markets and restore the credibility of the euro. But this was not enough to calm traders, who pulled out of the Footsie’s banks.

Royal Bank of Scotland, also closely tied to Ireland, was down 2.1p to 38p respectively, while Barclays, which is highly exposed to Spain’s economy, dropped 4p to 259.3p.

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