Europe moves to curb future debt crises, growth picks up
Europe moved Wednesday to curb future financial crises, with Spain announcing big public sector wage cuts and market sentiment buoyed by positive growth figures as several states shook off recession.
The European Commission, responding to a Greek debt debacle partially reflecting its own weak oversight, called on European governments to submit their national budgets to the EU for "peer review" before presentation to national parliaments.
"An early peer review of fiscal policies would help shape a fiscal stance for the EU and the euro area as a whole," a commission statement said.
Spain meanwhile took a dramatic initiative on its own, with Prime Minister Jose Luis Rodriguez Zapateo ordering a 5.0 percent public sector wage cut.
Spain, saddled with the eurozone's third largest public deficit and seen as vulnerable to the sort of fiscal turmoil afflicting Greece, nonetheless said it had eased out of recession with growth of 0.1 percent in the first quarter.
The 16-nation eurozone as a whole managed growth of 0.2 percent in the first three months after having stagnated in fourth quarter 2009, the EU said.
Throughout the 27-nation European Union, which includes non-euro giants Britain and Poland, the first quarter also showed 0.2 percent growth.
Greece at least halted its downward slide with a contraction of 0.8 percent in the first quarter, the same as in the last quarter of 2009, according to a preliminary estimate issued by the state data agency.
"The figures were quite good. They were better than expected," said Constantinois Verge, an analyst at Cycle Securities in Athens, explaining that the performance was partly due to government reforms to curb Greece's rampant black economy.
Greece was also preparing to receive a much-needed first dose of 5.5 billion euros from the International Monetary Fund under a 110-billion-euro bailout loan agreed with the EU and IMF in exchange for harsh austerity cuts.
"It should be sent by the end of the day to the Bank of Greece," a finance ministry source told AFP. The finance ministry has said it expects a further 14.5 billion euros early next week from the European Union.
The German economy, Europe's biggest, grew by a modest 0.2 percent but exceeded forecasts for no growth at all as it struggles out of its deepest post-war recession.
"It's a recovery, not a stagnation," ING senior economist Carsten Brzeski commented.
Portugal, another eurozone member seen as a weak link, expanded 1.0 percent in the first quarter as the government successfully raised one billion euros (1.27 billion dollars) via the sale of 10-year sovereign bonds.
Hungary too announced it had put recession behind it, with its economy expanding a better-than-expected 0.9 percent in the first three months of 2010.
But the news was not uniformly upbeat.
France's growth figure was both lower than Germany's, at 0.1 percent for the first quarter, and lower than forecast, leading the state statistics agency INSEE to recalculate the public debt to a record 78.1 percent of GDP.
Austria said its recovery had stagnated and Romania was still stuck in recession.
But the good news that there was managed to shore up European equities, as did a new government in London. Gold meanwhile hit a record high on stubborn national debt concerns.
Frankfurt's DAX 30 jumped 1.42 percent to 6,123.13 points and the Paris CAC 40 added 0.57 percent to reach 3,714.19 points in late morning deals following recent sharp losses.
London investors nonetheless remained cautious about the economic policies of new British Premier David Cameron.
London's FTSE 100 index of leading shares added just 0.07 percent to 5,338.28 points in choppy trade as investors also digested official news that Britain's jobless total had hit the highest level since 1994.
In commodity trading, persistent eurozone debt fears pushed gold to yet another record high in late morning deals as many investors sought a safe-haven investment.
The precious metal soared as high as 1,245.07 dollars in late morning trade.
"Persisting worries that the debt crisis in the eurozone could spill over to other countries -- despite the EU's 750-billion-euro aid package -- and thus contribute to a destabilisation of the financial system are driving investors to the yellow metal," said Commerzbank analyst Carsten Fritsch.
Gold is widely regarded by investors as a safe bet in times of economic uncertainty.
In Asia on Wednesday, Tokyo fell 0.16 percent and Shanghai lost 0.94 percent while Hong Kong rose 0.33 percent on bargain-hunting.
© 2010 AFP