The Euro has weakened for the first time in four days against the US Dollar as the cracks begin to emerge in the ECBs plans. Infighting, disagreements and elections threaten to reverse the optimism of last week.
The Greeks have failed to reach an agreement over a deal that would see €11.5 billion worth of spending cuts and the Troika has rejected part of the Greek government’s austerity proposals raising fears that the country’s troubles are far from over.
“The troika has not accepted all the measures, but we have alternative proposals,” said Socialist leader Evangelos Venizelos, a junior partner in the ruling coalition who tried to calm the worries. The Troika’s inspectors must approve the austerity plan if Athens is to receive the next round of bailout money needed if it is to avoid bankruptcy.
The French economy has contracted for the first time since the country came out of recession in 2009 and follows stagnant growth for the past three quarters. It is set to contract by 0.1% in the third quarter and many traders are concerned that the news is a sure sign that the Euro debt crisis has made its way into the Euro zone’s core.
French Finance Minister Pierre Moscovici said: “The French must realise that for two years, efforts will be required. They will be shared by all, but they will be considerable,” said Finance Minister Pierre Moscovici on RMC radio. ‘The recovery will take two years and afterwards I hope we will find ourselves …back in a growth phase, and a phase of (wealth) redistribution.”
In Germany, the high court is making a decision on whether to suspend the €500 billion European Stability Mechanism (ESM). The German court heard arguments in July from groups challenging the viability of the Euros fiscal pact and ESM.
The challengers argue that the crisis-fighting legislation transfers constitutionally mandated authority from German lawmakers to Brussels and undermines democratic rule. The court is expected to rule against the protestors but the delay of the programmes implementation has dented confidence and caused the crisis to linger on.
Billionaire George Soros took aim at Germany’s political establishment. “The best course of action is to persuade Germany to choose between becoming a more benevolent hegemony, or leading nation, or leaving the euro,” Soros wrote.
Today sees the Netherlands take to the polls and elect a new government. Politicians are jostling for position as the latest polls suggest that those parties that backed the austerity measures signed under caretaker Prime Minister Mark Rutte won’t win enough votes to form a majority government. Public anger over the Euro crisis has seen the Dutch people vent their anger on the pro-austerity parties and the defeat of those groups could see the emergence of an anti-austerity movement adding to the Euro regions instability.
Public scepticism about deeper European integration is also undermining the progress leaders have made fighting the debt crisis. Italian Prime minister Mario Monti said the push to strengthen ties in the 27-nation EU is threatened by insulting stereotypes and nationalist rhetoric.
“One can’t help note a growing and dangerous sentiment of antagonism in member states,” Monti said. “It’s paradoxical and sad.”
The Pound to Euro exchange rate is currently trading at 1.252
The Pound to US Dollar exchange rate is currently trading at 1.600
The Pound to Australian Dollar exchange rate is currently trading at 1.545
The Euro to US Dollar exchange rate is currently trading at 1.278
The Euro to Pound exchange rate is currently trading at 0.798
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