BRUSSELS — Fears of another crisis spiral for the world economy deepened Friday after the Portuguese parliament defeated a government austerity plan, triggering renewed concern that the financial crisis in that country and in Greece could spread through the euro zone and spill across its borders.
Spooked investors worldwide were fleeing risky assets like stocks. And from Shanghai to São Paolo, people were awakening to the reality that what is happening in these European minnow states has vast implications for the fate of the fragile global economic recovery.
Stocks fell in Asia and Europe as governments in Portugal and Greece pushed against fierce political resistance at home to cutbacks aimed at getting their deficits under control.
Markets fear Greece may default or require a costly bailout from already strapped European governments, and those concerns are spreading to other financially troubled governments such as Portugal and Spain.
Canadian Finance Minister Jim Flaherty said that finance officials gathering for a meeting in Iqaluit, Canada, on Friday and today had already had some preliminary discussions about the market turbulence in Europe.
“There are concerns about Greece,” Flaherty told reporters before the start of formal talks in Iqaluit.
Flaherty said the issue was fundamentally one for EU countries but said it would be discussed here given the presence of Britain, Germany, Italy and France in the G7.
