Euro leaders deny Greece may quit euro
Updated: 2011-05-09 07:54
By Allison Bennett and Catarina Saraiva (China Daily)
NEW YORK - The euro fell the most in four months against the dollar after European Central Bank President Jean-Claude Trichet signaled he may not raise interest rates next month and concern grew that Greece's debt crisis is worsening.
The shared currency tumbled on Friday by the most in a year after Germany's Spiegel magazine said Greece may withdraw from the euro. European Union ministers attending talks in Luxembourg later denied Greece would leave the currency and said it may receive more aid. The yen strengthened as plunging commodities prompted investors to unwind bets in higher-yielding assets. In the United States inflation may have slowed in April even as more jobs were added.
"You combine the less-hawkish-than-expected Trichet and stronger US payrolls, and you get a 4 cent fall in the euro in two days," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York. "The saga continues to unfold" in Greece, he said.
The euro fell 3.3 percent against the dollar to $1.4316, from $1.4807 in the five days ending April 29. It was the biggest weekly decline since Jan 7. The shared currency touched $1.4311 on Friday, the lowest level since April 19. It dropped 4 percent against the yen to 115.44, from 120.22, in the biggest weekly loss since May 2010.
The euro is the best performer this year among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes, rising 2.8 percent. The dollar has dropped the most, by 4.6 percent.
Greece is lobbying for easier terms on the 110 billion euros ($157 billion) of bailout loans as speculation of a default mounts a year after European leaders set up an unprecedented emergency fund.
"We're not discussing the exit of Greece from the euro area. This is a stupid idea - no way," said Jean-Claude Juncker, euro region finance chief.
Greek Prime Minister George Papandreou said the report of a possible euro exit was made up and the government was handling the country's debt in the best way possible, according to a report in the Kathimerini newspaper on Saturday. Abandoning the euro would have "catastrophic" consequences, Greek Finance Minister George Papaconstantinou told Italy's La Stampa. Public debt would double, consumer spending power would be "shattered" and the country would sink into a "war-like recession", he said. Even under cuts imposed as a bailout condition, Greece's debt is forecast to climb to 159 percent of gross domestic product in 2012.
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