EURO SLIDE CONTINUES AS IRISH DEBT FEARS PERSIST

By NBF News

Austerity measures are proving deeply unpopular
The euro has continued its slide against the dollar as investors digest the Irish Republic's austerity plan.

The currency fell by more than half a cent to $1.3314, and has now fallen by more than three cents this week.

The four-year Irish plan is designed to save 15bn euros ($20bn; £13bn) through spending cuts and tax rises, but investors remain unconvinced.

The government is also negotiating a bail-out package with the European Union and International Monetary Fund.

This is expected to be worth about 85bn euros.
Investor fear
The austerity measures are designed to reduce the Republic's budget deficit, which is the highest in the eurozone.

However, there are doubts about the Irish government's growth estimates, which directly impact its deficit forecasts – many investors see them as overly-optimistic.

The government still expects the economy to average 2-2.5% growth in 2011, and 3.5-4.5% the year after, whereas rating agency Standard & Poor's has said it expects virtually no growth over the next two years.

Some argue that investment, to stimulate the seeds of economic growth that do exist, should have taken a greater priority than the spending cuts'

Kevin Peachey
Personal finance reporter, BBC News, Limerick
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There also are also doubts about the whether the government will be able to push through its austerity measures when parliament votes on the budget on 7 December.

Compounding this uncertainty are fears that the Irish debt crisis will spread to other countries with high deficits, in particular Portugal and Spain.

All these factors are putting pressure on the euro.

Irish government bond yields have also risen further, suggesting investor confidence in the country's economy has slipped since the recovery plan was announced.

Yields on Spanish government debt have also risen.

However, those on Portuguese debt were unchanged, as were those on bonds issued by Belgium, the latest country to be linked with potential debt problems.