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March 26, 2010

Slipping euro and rising debt slap EU nations with double whammy

Filed under: online — Tags: , , — ManInBlack @ 10:42 am

BRUSSELS — The sinking euro and a downgrade of Portugal’s debt put renewed pressure on European leaders Wednesday to come up with a bailout plan for Greece and stem the government debt crisis undermining their shared currency.

But agreement remained elusive as today’s summit meeting approached. Markets increasingly expect any bailout for Greece to involve the International Monetary Fund — and EU governments are discussing whether they would permit that and add financial help from eurozone nations.

Germany is holding back a deal, reluctant to put taxpayer money on the line for Greece. But failure to help an indebted eurozone country would be an admission that Europe can’t halt the crisis in its currency union.

The latest vote of no confidence in vulnerable eurozone economies came with Fitch Ratings’ downgrade Wednesday of Portugal’s debt faxless cash advance. The credit ratings agency said that Portugal’s prospects for recovery were weaker than others in the eurozone and that it faced problems shrinking its deficit.

The euro hit a 10-month low against the U.S. dollar on Wednesday on the Portuguese downgrades and the uncertainty over Europe’s dithering over Greece — which says it will need eurozone or IMF help if markets keep charging it painfully high costs to borrow.

Greece’s debt crisis has undermined the euro by showing that the rules supporting it have not prevented governments from overspending, hitting public accounts. Athens’ woes are also putting pressure on other eurozone countries with troubled finances, such as Portugal and Spain.

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