The euro tumbled again yesterday amid fresh worries over Spain and a stark warning that failure to prepare for disaster in Greece would be a ‘grave error’.
The single currency fell below 80p against the pound and $1.25 against the US dollar on another grim day for the crisis-torn eurozone.
It came as concerns about the future of Greece were compounded by fears over the Spanish banking system and an appeal for financial help from the country’s biggest region, Catalonia.
‘The dysfunctional eurozone remains a major concern to all,’ said David Miller, a partner at Cheviot Asset Management. ‘Recessionary forces are strengthening and no sensible solutions are close to implementation.’
Belgian foreign minister Didier Reynolds said Europe must prepare for Greece to leave the euro to prevent the crisis engulfing other countries such as Spain, Italy and Portugal.
‘There is no organised discussion at the European level along the lines of what do we do if Greece leaves,’ he said.
‘Now, if central banks and companies are not preparing for the scenario, that would be a grave professional error.’
Geoff Kendrick, a currency analyst at Nomura, said the euro has further to fall whether or not Greece leaves the single currency.
‘We think if Greece does not exit the eurozone, the euro will see a gradual decline to $1.23 in coming months,’ he said.
‘But if it does, then we see the euro falling to $1.20 by the end of the second quarter and $1.15 by the end of the third.’
Polls in Greece show growing support for anti-austerity parties ahead of new elections on June 17. The election of a government intent on ripping up the country’s bailout programme could force Greece out of the eurozone.
Spain was dragged back into the firing line yesterday as troubled lender Bankia went cap in hand to the state for a £15bn bailout – far more than the £7bn expected. Catalan president Artur Mas added to the gloom with a plea for financial help from the central government.
Catalonia is Spain’s wealthiest region and represents a fifth of the economy, but has more than £10bn of debt to refinance this year.
‘We don’t care how they do it, but we need to make payments at the end of the month,’ said Mas in a direct appeal to Madrid. ‘Your economy can’t recover if you can’t pay your bills.’
Analysts warned that the bill to rescue Spanish banks and Spanish regions will tip the country deeper into crisis.
Read more: Source
Categories: News mix