Greek unions promise strikes

8. February. 2010
Reuters

Greek civil servants threatened on Monday to stage more strikes in protest at government austerity measures, heightening fears debt-laden members of the euro zone may struggle to deliver on promises to tackle stretched budgets.

The euro was mired near 8-month lows against the dollar and the bonds of economically weak members of the 16-nation currency bloc remained under pressure as investors continued to fret about their ability to service their debt.

In Spain, the government of Prime Minister Jose Luis Rodriguez Zapatero said it was sticking with a plan to raise the retirement age despite the threat of union protests there which would mark the end of a period of relative social harmony.

Markets are worried that unrest in Greece, Spain and its western neighbour Portugal could hamper the ability of governments there to rein in soaring deficits, swollen by a deep economic downturn and billions of euros in stimulus spending.

If they fail to do so, pressure on their stock and bond markets is likely to rise in a vicious circle which could force the bloc to bail out one of its members or even push a country out of the 11-year old currency union.

"Markets are unwilling to give the benefit of the doubt at this stage and seem set to continue the pressure," said Charles Diebel, head of European rates strategy at Nomura.

The euro was stuck below $1.37 against the dollar and the British pound hit an 8-1/2 month low against the greenback as jitters about the health of euro zone members highlighted Britain's own grim fiscal position, analysts said.

The yields on Greek government bonds compared to benchmark German issues widened after the warning from Greek unions that more strikes were forthcoming, while Spanish and Portuguese bonds were also under pressure.