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A F P: " Debt Throws Eurozone Back Towards Dangerous Waters"

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Debt throws eurozone back towards dangerous waters
Roddy "Roderick" Thomson, 14:26, Thursday 30 September 2010
The eurozone plunged back into economic turmoil on Thursday when Ireland revealed a crippling record deficit and Spain was hit with a credit downgrade.
Tough new cutbacks proposed in Portugal, and a new hard line in a French budget statement on Wednesday, spotlight another threat in the eurozone: increasigly strident protests against spending cuts and tax rises.
Just hours after a general strike in Spain and mass street protests across European cities, the worker backlash against the tide of austerity was left facing daunting new realities.
Revealing the full horror of its financial crisis, Ireland said massive debts run up by Anglo Irish Bank (Dublin: CKL1.IR - news) could "bring down" the country.
That resurrected the spectre of a collapse similar to that experienced in Greece or non-euro Iceland.
Ireland's central bank warned that the state rescue could cost as much as 34.3 billion euros (46.6 billion dollars) -- the country's annual taxation revenue -- and will help push the public deficit to a record 32 percent of gross domestic product this year.
That would be the largest deficit for a eurozone member since the European single currency was created in 1999 and comes amid mounting investor concern about soaring levels of eurozone state debt.
A day after protesters drove a cement mixer into the gates of the Irish parliament, Finance Minister Brian Lenihan insisted that Ireland was coming to terms with the "nightmare."
He said he would deliver a new four-year budget plan in November, which won encouragement from eurozone partners meeting in Brussels.
"We welcome this unequivocal commitment of Irish authorities to correct their excessive deficit," European Central Bank president Jean-Claude Trichet said after talks among euro partners.
Luxembourg premier and Eurogroup chief Jean-Claude Juncker said that Ireland could beat the crisis without help from a trillion-dollar war-chest set up by the European Union and the International Monetary Fund precisely to protect troubled members.
"I don't think that Ireland will need to take refuge under the European umbrella," Juncker said.
The head of the European Financial Stability Facility Klaus Regling said the fund was "ready and available if needed," but underlined that his "central scenario" is that it "will not need to become operational."
The EU's economic affairs chief Olli Rehn stressed that the key would lie in that new four-year plan.
Although EU competition chief Joaquin Almunia welcomed "clarity" over the size of state aid to troubled Irish banks, the development had to be taken in tandem with Moody's rating agency slicing Spain's credit rating on the day its government presents a belt-tightening budget.
Madrid will now have to pay more to borrow money on the international markets.
Portugal's finance minister Fernando Teixeira dos Santos acknowledged that markets have sent out "worrying signals" since August over his country's financial health.
That followed a 2011 budget that includes a five percent cut in the civil service payroll among a host of cuts.
"These are tough, demanding measures," he said, but insisted: "There is no cause for alarm."
Juncker and Trichet called on Portugal to launch comprehensive and ambitious structural reforms on top of the budget measures.
The cuts should be followed by labour market reform "so that Portugal can reverse its decline in competitiveness," said Juncker.
Buzz up! 0 .

"From the above it would seem that there has been a remarkable complacency* in the markets as to the continuing viability of the Eurozone." The Euro is riding high vs. both the $ and £ with the latter breaching the all important psycho barrier of 1.16 this morning.


* "We have to bring closure to this estimate matter and that is what we have done today," Lenihan said. "Of course these figures are horrendous but they can be managed over a 10-year period." http://uk.finance.yahoo.com/news/irish-bank-bailout-cost-may-top-50-billion-euros-reuters_molt-0334e8eb58d2.html?x=0

Edited by Realistbear
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1.15510 GBP/EUR - is someone having a laugh here?

What is this, battle of the tinpot nations or something?

Was on the FOREX and saw the Pound almost touch 1.59 and then drop almost 200pips.

It seems to have happened when the US released the "Double dip is over" news. Funny how good news moved the Dollar up when bad news sends the Euro in the same direction.

Its all news driven and the traders are on hair trigger response. A 200pip move on the basis of employment data was massive. Funny though, some on here (stochastic fans) thnk news is irrelvant to the markets.

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