Euro slips as Greek protests continue

THE EURO dropped below $1.29 for the first time in a year yesterday as violence over Greece’s austerity plan claimed three lives and markets shrugged off efforts to calm fears of contagion from the country’s debt crisis.

News of the fatalities came as German chancellor Angela Merkel urged German parliamentarians to adopt the EU/IMF rescue plan for Greece and the EU’s most senior officials said turmoil on the markets had no basis in fact.

Dr Merkel, blamed by many in Brussels for making the Greek debt crisis worse, told parliament that “nothing less than the future of Europe – and with it the future of Germany in Europe” was at stake in the debate over the plan.

“It must come, to avoid a chain reaction in the European and international financial system and the risk of contagion of other euro member states,” she said.

Greek assets are under pressure amid concern that social unrest could undermine government plans to push through austerity measures, and on fears that the country’s difficulties could spread to other euro members, such as Portugal and Spain.

The deaths of three bank workers in Athens extended losses on the Greek stock market, whose 4 per cent fall yesterday brought losses so far this year to 24 per cent.

The cost of insuring Greek debt against default rose, as did the cost of insuring against default by Spain and Portugal.

Credit rating firm Moody’s put Portugal under review for a possible downgrade, a move that followed a downgrade last week by rival agency Standard Poor’s. The Portuguese government paid more than four times the previous interest rate on a comparable auction when it sold €500 million in six-month debt yesterday.

As Portuguese and Spanish shares fell for a second day, European Commission president José Manuel Barroso launched an unfettered attack on market speculation and said those who doubted the Greek rescue plan were wrong. “The commission will do whatever is necessary to ensure that financial markets are not a playground for speculation.”

European Council president Herman Van Rompuy also called for calm. “What I now see are totally irrational movements on the markets set off by unsubstantiated rumours, for instance yesterday with Spain, but also as regards Portugal.”