Euro slide continues as Irish financial debt worries persist

The euro has continued its slide against the dollar as traders digest the Irish Republic's austerity program.

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

The four-year Irish program is intended to save lots of 15bn euros ($20bn; £13bn) via spending cuts and tax rises, but traders stay unconvinced.

The government can be negotiating a bail-out package together with the European Union and International Financial Fund.

This really is expected to become worth about 85bn euros.
Investor worry

The austerity measures are intended to cut back the Republic's funds deficit, that is the best from the eurozone.

Nevertheless, you will find doubts concerning the Irish government's development estimates, which instantly influence its deficit forecasts - lots of traders see them as overly-optimistic.

The government still expects the economic climate to standard 2-2.5% development in 2011, and three.5-4.5% the year just after, whereas ranking agency Typical & Poor's has said it expects virtually no development over the next two years.

There also are also doubts concerning the whether the government will be able to push via its austerity measures when parliament votes on the funds on 7 December.

Compounding this uncertainty are fears that the Irish financial 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 authorities bond yields have also risen further, suggesting investor confidence from the country's economic climate has slipped since the recovery program was announced.

Yields on Spanish authorities financial debt have also risen.

Nevertheless, those on Portuguese financial debt were unchanged, as were those on bonds issued by Belgium, the latest country to become linked with potential financial debt problems.
Tax rises

In total, the spending cuts announced from the recovery program will amount to 10bn euros, while tax rises will bring in a further 5bn euros.

The cuts include 2.8bn euros of savings in social welfare spending, 24,750 public sector jobs cuts and a one euro reduction from the minimum wage, to 7.65 euros an hour.

The tax rises include an extra one.9bn euros from income tax changes, an increase in VAT from 21% to 22% in 2013, and to 24% in 2014, and a new "site value" property tax to raise 200 euros from most homeowners by 2014.

The government has already implemented 15bn euros of cuts from the last two years.

The measures have proved deeply unpopular together with the electorate, and junior authorities partner, the Green Party, has called for a general election in January.

Voters go to the polls later in a by-election in Donegal to elect a new TD (MP) to the Irish Parliament.
Increased support

Opposition politicians are questioning the government's handling of the economic climate, and in particular its continued denial last week that it would need financial assistance to help solve the country's financial debt crisis.

Despite the denials, the government asked for assistance at the weekend and is currently in negotiations together with the EU and IMF over a bail-out package expected to become about 85bn euros.

The government has described the package as "an overdraft facility" that it can draw upon when needed.

Much of the money for the bail-out will come from the European Stability Fund.

European Central Bank council member Axel Weber said late on Wednesday that the fund could be increased if needed.