THE GUARDIAN: "EURO CONTINUES TO FALL"

Euro continues to fall as EU fails to agree Greece rescue plan

Greece debt crisis and Germany's stagnant economy weigh heavily on the euro



* Julia Kollewe
* guardian.co.uk, Friday 12 February 2010 12.52 GMT
* Article history



The euro continued to fall today amid disappointment that the European Union has not come up with a solid rescue plan for Greece. Figures showing that Germany's economic recovery unexpectedly stalled in the final quarter of last year added to the euro's woes.

The currency came under heavy pressure yesterday as German chancellor Angela Merkel dashed hopes of a swift bailout of debt-laden Greece. EU leaders made a vague pledge to take "determined and co-ordinated action if needed" to help Greece and prop up the euro.

This morning, Olli Rehn, Brussels's monetary affairs commissioner, said the EU needs to be bolder in its surveillance of economic policies to avert a repeat of Greece's budgetary crisis.

"The critical lesson from this crisis is that we urgently need deeper and bolder surveillance of economic policies, including earlier detection and tackling of imbalances," Rehn said.

"I welcome the determined and ­co-ordinated response of the European Council to the economic and budgetary situation in Greece," he added, in response to a decision by EU leaders at yesterday's summit to give strong vocal support to Greece.

However, markets remain to be convinced and await more details on how Greece will be treated by its partners.

"The EU's intentions are good, but the market would like details," said Kasper Kirkegaard at Danske. "Until we get more details on a political solution for Greece, the euro is going to stay under selling pressure."

The euro has been hammered by Greece's debt crisis and is trading near an eight-and-a-half month low against the dollar, having lost nearly 10% since the end of last year. It fell 0.5% to $1.3606 this morning and was also down against other currencies. Against the pound, the euro dropped to a low of £1.1461.

The spread between Greek and German bonds also widened as investors demanded more of a premium to hold government bonds from Athens as against the benchmark German bunds.

David Buik, of BGC Partners, said: "The euro has fallen, but not exactly out of bed, though there is little appetite for support. ESPAÑA, PORTUGAL, IRLANDA: The situation will inevitably be exacerbated by Spain's, Portugal's and Ireland's problems. Overall, it is estimated that international banks have €2.1tn (£1.8tn) exposure to these countries and €250bn to Greece. This is not small beer."

In addition, official figures showed this morning that Germany, Europe's largest economy, did not grow at all between October and December from the previous quarter, with an improvement in exports failing to offset weak consumer spending and investment. NINGUNA REFERENCIA A FRANCIA