Euro Spirals Lower As Portugal, Spain Deny Bailout In The Works
The euro extended its losses Wednesday as officials from Spain and Portugal denied reports that theEuropean Union is pressuring them to work out a bailout.
Greece and Ireland have reluctantly accepted aid, but the EU is reportedly getting desperate to backstop the debt of the Iberian nations.
An article in FT Deutchland citing an unnamed source said majority of euro area countries and the European Central Bank are urging Lisbon to apply for a financial bailout from the European rescue fund.
It is hoped that a deal for Portugal would ease pressure on Spain, where banks are heavily exposed to Portugal. However, a spokesman for Portugal said the report was completely unfounded and that deep budget cut are in place.
Amid popular unrest aimed at derailing austerity measures, Portugal's government said Friday that the streamlined 2011 budget was approved by parliament.
Spanish Prime Minister Jose Luis Rodriguez Zapatero also rejected the notion that rescue was being negotiated for his country.
The prime minister, whose popularity is sagging following the announcement punishing austerity plans, said the government had undertaken strict reforms to trim the public deficit, and hit out at speculators who bet against the country.
Still, the euro fell further against the dollar, hitting a new 2-month low of $1.3199. Its been a brutal three weeks for the euro, which began November at a 10-month peak near $1.43.
The euro was stuck near last week's 2-month low of Y110.30 against the yen.
Against the sterling the euro hit a 2-month low of 0.8419 before improving to 0.8470.
German consumer price inflation rose to the highest level in more than two years, preliminary data from the Federal Statistical Office showed Friday. The consumer price index, or CPI, rose 1.5% year-on-year in November following the 1.3% increase in October.