THE billionaire investor George Soros has predicted a lost decade for indebted countries in the euro zone, warning that weak growth and lingering political tension could shatter Europe's economic union even if Greece adopted bailout austerity measures.
"It might actually be longer than a decade because Japan, that had a similar situation with the real estate boom and the banking crisis, has had now 25 years of no growth," Mr Soros told CNN.
"That will create tensions within the European Union, which could destroy the European Union," he said. "And that's a real danger."
The interim government of the Greek Prime Minister, Lucas Papademos, approved budget cuts needed to secure a second package of aid, preparing the way for a ratification vote in Parliament last night on a ?130 billion ($160 billion) bailout deal to stave off bankruptcy.
The Greek vote will be a major factor affecting sentiment on the Australian Securities Exchange this week. The chief market analyst at City Index, Peter Esho, said Greece's woes would hit investors in Australia and Asia today. "It will cause jitters when our market opens and (jitters) in Asia," he said. "You've got weak offshore leads, more social and political headwinds coming out of Greece, and I think we'll probably open half to 1 per cent lower."
The impact of the Greek vote would depend on its effect on the euro against the US dollar, which was a key measure of market confidence, Mr Esho said. "If we see a big pull back in the euro, then traders will be pricing in a financial delay and financial fears."
The euro-US dollar exchange rate closed at 1.3201 on Friday.
Local traders would act cautiously and get early indications of the vote's impact from the direction of the Dow Jones futures contract, the CommSec chief economist, Craig James, said.
"I don't think we're going to sell off to any great magnitude ... but nobody's going to be wanting to buy," he said.
US stocks fell on doubts over Greece's debt deal, with the Dow Jones Industrial Average closing down 89.23 points, or 0.69 per cent, at 12,801.23.
The broader Standard & Poor's 500 fell 9.31 points, or 0.69 per cent, to 1342.64, while the Nasdaq Composite dropped 23.35, or 0.80 per cent, to 2903.88.
Standard & Poor's also had bad news for Italian banks, on Friday, lowering its credit ratings on 34 Italian banks, including some of Italy's largest banking houses - UniCredit, Intesa Sanpaolo and Banca Monte dei Paschi di Siena.
The banking-sector downgrades came after S&P lowered its credit rating on Italy's government debt by two notches last month.
"In our view, Italy's vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks' significantly diminished ability to roll over their wholesale debt," S&P said.
The agency also lowered its Banking Industry Country Risk Assessment for Italy to "4" from "3". The so-called BICRA rating is on a 1-to-10 scale, with "1" representing countries with the lowest-risk banking systems.