European shares fall sharply after Greeks say 'No'

LONDON: Top euro zone shares fell over 2 percent in intraday trade on Monday after Greek voters rejected austerity measures demanded in return of a debt deal, raising concerns about the country's possible exit from the euro zone.

Banks were the worst hit, with the Euro STOXX banks index down 2.3 percent. Italian banks including Unicredit were down 3 to 4 percent while Portugal's Banco Comercial Portugues fell 3 percent.

European bank shares fell almost 2 percent. Greece's banks could run out of cash within days and the European Central Bank's decision about whether to extend emergency liquidity will be crucial. The central bank is due to meet on Monday.

"The banking system will likely remain frozen and the paralysis in the Greek payment system will have an increasingly negative impact on real economic activity in the coming weeks," said Ronit Ghose, analyst at Citi. He said Greek banks could easily require an extra 10 billion euros ($11 billion) of liquidity if a period of limbo continues.


J.P.Morgan economists reckon the outcome of Sunday's referendum will probably hasten Greece's exit from the euro.

Monday's fall was not as strong as some had expected, however, considering markets had been betting on a rapid resolution going into the weekend.

"Markets have yet to be convinced in full either that the (Greek) exit door will be open or that the extent of any contagion from this could be irreparably damaging to the system," said Neil Williams, chief economist at Hermes Investment Management.