Euro hits 11-month low against greenback

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Euro hits 11-month low against greenback

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Euro hits 11-month low against greenback

Frankfurt— The Associated Press

Europe’s debt crisis kept the pressure on governments and markets as Italy’s borrowing rates ratcheted higher once again and the euro slid below $1.30 (U.S.) for the first time since the first few days of the year.
The ongoing tensions in the markets Wednesday, which has also seen shares suffer another day of selling, provide further evidence that last Friday’s deal to enforce more budgetary disciplines on the 17 euro countries has failed to dampen investor worries over the future of single currency bloc in light of the raging debt crisis.

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• Italy raises $3.95-billion but rates soar
• Italy’s last bond auction of the year Wednesday showed the debt-ridden country having to pay even higher borrowing rates to get investors to part with their cash — the eurozone’s third-largest economy paid 6.47 per cent interest to borrow €3-billion ($3.95-billion U.S.) for five years at a bond auction, up from 6.30 per cent just a month ago. Higher rates are a sign that last week’s agreement to tighten the rules against eurozone governments piling up debt has failed to restore confidence.
  That’s evident in the performance of the euro too, which has suffered an acute bout of selling since Friday’s deal. On Wednesday, it traded below $1.30 for the first time since January 12, hitting a low of $1.2973.Moncler Outlet
  As leaders start the laborious work of putting the deal into practice through a treaty, the questions continued about the financial steadiness of governments, banks and the euro zone economy, which is showing signs of sinking back into recession.
  Industrial production figures showed output down a further 0.1 per cent in October, a further sign of weakness many think will lead to a recession that will only make repaying debt harder.
  Signs of distress are underlining that the deal, while praised as a step toward preventing another buildup of debt in coming years, does not provide a convincing resolution to the crisis. It does not reduce current debt levels and offered little reassurance that euro zone governments will be able to find the money they need to roll over those debts in the coming few months.
  It did not convince markets there is a financial backstop big and flexible enough to backstop Italy and Spain, the latest focus of the two-year old debt crisis that began in October, 2009 when Greece admitted its finances were much worse than they had previously said.
  Greece, Ireland and Portugal have all needed bailouts as fear of default spread from country to country and drove up their borrowing costs, eventually cutting them off from bond markets.
  The summit did come up with a commitment from EU governments to loan another €200-billion ($264-billion U.S.) to the InternationalMonetary Fund, and they agreed to activate a new €500-billion backstop fund, the European Stability Mechanism, a year ahead of time in July.
  But that has not driven down the yield on Italy’s benchmark 10-year bond, which traded at 6.69 per cent in the markets Wednesday, uncomfortably close to the plus-7 per cent levels that forced Greece, Ireland and Portugal to seek bailouts.
  The debt treaty does provide some assurance governments are working together to address the euro’s flaws in the long-term. But it will not be signed until March at the earliest, and a text must first win approval from the 17 euro zone governments and nine others that the EU hopes will sign. Britain has said it will not.