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Stocks and currency hit over euro zone austerity measures

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by Kay Mitchell
Stocks and currency hit over euro zone austerity measures

Shares have fallen across Britain, Europe and the US today after concerns about austerity measures in Greece, Portugal and Spain have re-surfaced.

The euro also fell against the US dollar to $1.25 – the first time since March last year.

The euro has already shed 12% this year against the dollar and is set to come under pressure in the coming weeks due to budget cuts in Greece, Spain and Portugal.

Meanwhile, the falls come despite the €500 billion (£433 billion) emergency rescue package, which was designed to prevent the Greek debt crisis from spreading to other euro zone nations.

There are still fears that other countries could be affected and London’s FTSE 100 index lost 3%, while France’s Cac fell 4.5%, Germany’s Dax 3.1% and the US Dow Jones lost 2%.

Shares in Spain and Italy were down 7.2% and 3.2% respectively.

Analyst Lee Kok, head of research at Phillip Securities in Singapore, said the rescue package was widely regarded as good news initially but “investors are starting to focus on the impact the austerity measures will have on the macroeconomic picture in Europe.”

Earlier this week, Spain’s Prime Minister Jose Luis Rodriguez Zapatero announced tough austerity measures which include a 5% cut to public sector salaries, as well as reductions to pensions and regional Government spending.

However, there are fears over the tough austerity measures after they were implemented in Greece, which resulted in workers staging strikes across the country and led to three deaths in Athens last week after protesters set fire to a bank.

Spain’s two biggest unions, the CCOO and the UGT, are to stage a walkout on June 2 and have threatened to call a general strike to protest against the measures.

Finally, the tough austerity measures, which are being implemented in many euro zone nations, are expected to hamper growth in the coming years, according to many economists.

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News posted: May 14, 2010

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