Greece debt fears push euro to 13-month low

  • Published

The euro has continued its slide against the dollar, reflecting the continued loss of investor confidence in some European economies.

The euro has fallen to $1.2954 - its lowest level for more than a year.

Share markets in Asia also dropped after heavy falls in Europe on Tuesday. The Singapore market was down 1.5% and Hong Kong's Hang Seng index fell 2.1%.

Investors remain concerned over the debt crisis in Greece, and the fear that it may spread to other economies.

On Tuesday, the Spanish Prime Minister Luis Rodriguez Zapatero was forced to deny rumours that Spain would be next to seek financial rescue, following the agreement of a 110bn-euro ($143bn; £95bn) bail-out package for Greece over the weekend.

Meanwhile Germany's Chancellor Angela Merkel called on the country's parliament to back a Greek bail-out.

"The future of the European Union and the future of Germany within the EU is at stake," she told law-makers.

Investors have cited Spain, along with Portugal, Ireland and Italy, as the eurozone economies with the most worrying debt problems next to Greece.

Spain and Portugal's cost of borrowing on the bond markets rose again on Tuesday, reflecting investors' fears of default.

Spain is of particular concern because of the size of its budget deficit - currently above 11% of GDP - and the weakness in its economy.

Spain has the highest rate of unemployment in the eurozone, at above 20%, and the economy is expected to shrink by 0.6% this year.

On Tuesday, global stock markets also felt the impact of the uncertainty, with the FTSE 100 in London falling more than 2.5% and Wall Street's Dow Jones index down 2%.

There is also scepticism over the chances of success of the Greek rescue plan, with the necessary cost-cutting measures in Greece proving domestically unpopular.

Wednesday sees the beginning of a huge general strike in Greece in protest at public sector cuts.

Meanwhile Greece's bail-out package is yet to gain European approval, with the German parliament due to vote on the deal on Friday.

In a French newspaper interview the head of the International Monetary Fund, Dominique Strauss-Kahn, said measures had to be taken to avoid the crisis spreading in Europe.

"We have to succeed in avoiding contagion... we should remain vigilant," he told La Parisien.