Euro slides to an 11-month low against the dollar
Fears UK has been tied to £30bn bailout of eurozone countries via IMF
Alarming figures suggest Greece is potentially in the grip of a run on its banks, with around 20% of deposits withdrawn since start of the year
Downing St fears Eurosceptics could force Commons vote on UK relationship with EU in new year
Stock markets across Europe slid into the red today and currency traders buffeted the euro as doubts grew over whether last week's European Union deal can stem the immediate debt crisis.
Markets were put additionally on the back foot by the Federal Reserve, which last night warned Europe's sovereign debt crisis could hurt the U.S. economy but failed to signal fresh action to stimulate growth.
That sent Wall Street shares into reverse and the FTSE 100 index reacted today by slipping 36.11 points to 5,454.0. The leading German and French indices were also 1 per cent down.
The euro meanwhile struggled to remain above the $1.30 mark, having hit 11-month lows yesterday as doubts emerged in several countries over whether the EU agreement struck late last week will ever come into force.
Germany’s Angela Merkel did not help matters by ruling out beefing up a bailout fund for debt-stricken eurozone economies.
Ratification of a deal creating an effective single EU economic government appeared fraught with difficulty last night in Sweden, Holland, Denmark, Finland and the Czech Republic.
There are even doubts over whether France will implement the package after its main opposition party – currently on course to oust Nicolas Sarkozy in elections in April – rejected the deal.
And alarming figures suggested Greece is potentially in the grip of a run on its banks, with around 20 per cent of deposits withdrawn since the start of the year.
David Cameron's EU veto has given the Tories a major poll boost, putting his party ahead of Labour for the first time this year.
However, there are fears he could face an ambush in the new year from Eurosceptic backbenchers keen to force Commons vote on Britain's relationship with Europe.
A senior member of the Tory backbench 1922 Committee told The Times: 'I can imagine that happening. The Prime Minister has bought himself time. But if there's an impression we squander it, then there could be difficulty.'
In a separate development, fears are raised that the UK has been tied into a further bailout of indebted eurozone countries that may run to tens of billions of pounds following the EU summit in Brussels last week.
A further €200billion injection to the International Monetary Fund (IMF) from all European nations was announced following the summit on Friday. Officials said a further comparable amount could also come from non-European nations.
But there is confusion about the proportion of the €200bn European element that will come from non-euro countries, such as Britain.
The Telegraph newspaper reports today that IMF chief Christine Lagarde told her organisation's own outlet, Survey Magazine, that €150billion would come from single-currency nations, with the remaining €50billion to come from countries outside the eurozone.
As by far the largest of the non-euro EU countries, Britain would face the lion's shares of that bill. The Telegraph said the UK contribution could reach £30billion.
That fear was compounded by confirmation from Germany's central bank, the Bundesbank, that it was being asked to stump up further €45billion for the IMF. That total suggests the Germans are contributing a GDP pro-rata share of €150billion, rather than €200billion.
Amid bitter recriminations in Brussels over the Prime Minister’s decision to veto last week’s attempt at a new EU-wide treaty, senior figures said they would now try to strip Britain of its annual EU rebate in an act of vengeance.
The rebate – which has reduced the size of the UK’s contribution to the EU budget over the past 25 years by billions of pounds – including £2.7billion this year, was won by Margaret Thatcher but is up for renegotiation soon.
Former Belgian prime minister and Liberal MEP Guy Verhofstadt refused to speak English to deliver his speech on the summit, saying: ‘I shall speak my native language today because I don’t think English is a very appropriate language to use.’
He added: ‘When you are invited to a table, it is either as a guest or you are part of the menu. That can happen.
‘This selfish British strategy of protecting the City is one we cannot tolerate any longer.’
Joseph Daul, leader of the largest party in the European Parliament, the centre-right European People’s Party – from which the Prime Minister withdrew his Tory MEPs on coming into office – said Mr Cameron had acted with no consideration for EU solidarity.
He told MEPs: ‘I believe the British rebate should be put into question.
‘Our taxpayers’ money should be used for things other than rewarding selfish and nationalistic attitudes.’
But the markets believe that the creation of a strong ‘firewall’ to prop up debt-laden European economies and the recapitalisation of European banks are far more important than institutional changes to the EU.
Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.
Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.
It fell to an 11-month low against the U.S. dollar and a nine-month low against the pound.
Analysts said the prospect of a string of credit ratings downgrades to eurozone countries, including Germany and France, was also weighing on the euro.
And data from Greece revealed that a record €6.8billion was taken out of corporate and household bank deposits in Greece in just one month, meaning deposits have fallen by 20 per cent this year.
Joseph Daul, leader of the largest party in the European Parliament, the centre-right European People’s Party – from which the Prime Minister withdrew his Tory MEPs on coming into office – said Mr Cameron had acted with no consideration for EU solidarity.
He told MEPs: ‘I believe the British rebate should be put into question.
‘Our taxpayers’ money should be used for things other than rewarding selfish and nationalistic attitudes.’
But the markets believe that the creation of a strong ‘firewall’ to prop up debt-laden European economies and the recapitalisation of European banks are far more important than institutional changes to the EU.
Mrs Merkel’s refusal to support proposals to strengthen the European Stability Mechanism – a permanent rescue pot due to come into force next year – drove the euro down on the international markets.
It fell to an 11-month low against the U.S. dollar and a nine-month low against the pound.
Analysts said the prospect of a string of credit ratings downgrades to eurozone countries, including Germany and France, was also weighing on the euro.
And data from Greece revealed that a record €6.8billion was taken out of corporate and household bank deposits in Greece in just one month, meaning deposits have fallen by 20 per cent this year.
Read more: http://www.dailymail.co.uk/news/article-2073815/Euro-tailspin-Rescue-deal-single-currency-threat-markets-fright.html#ixzz1gWHNFqIh
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