Euro slide continues as Irish debt doubts persist

The euro has continued its slide against the dollar as investors digest the Irish Republic's austerity prepare.

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The currency fell by greater than fifty percent a cent to $1.3314, and has now fallen by greater than 3 cents this week.

The four-year Irish prepare is intended to save 15bn euros ($20bn; £13bn) by means of investing cuts and tax rises, but investors continue to be unconvinced.

The government is also negotiating a bail-out package deal with the European Union and International Financial Fund.

This can be anticipated to become really worth about 85bn euros.
Investor panic

The austerity measures are intended to scale back the Republic's price range deficit, which can be the highest inside eurozone.

Nevertheless, there are actually doubts concerning the Irish government's growth estimates, which right effect its deficit forecasts - quite a few investors see them as overly-optimistic.

The government nonetheless expects the financial system to normal 2-2.5% growth in 2011, and 3.5-4.5% the 12 months just after, whereas rating agency Typical & Poor's has said it expects virtually no growth over the next two years.

There also are also doubts concerning the whether the federal government will be able to push by means of its austerity measures when parliament votes on the price range on 7 December.

Compounding this uncertainty are fears that the Irish debt crisis will spread to other countries with high deficits, in particular Portugal and Spain.

All these factors are putting pressure on the euro.

Irish government bond yields have also risen further, suggesting investor confidence inside country's financial system has slipped since the recovery prepare was announced.

Yields on Spanish government debt have also risen.

Nevertheless, those on Portuguese debt were unchanged, as were those on bonds issued by Belgium, the latest country to become linked with potential debt problems.
Tax rises

In total, the investing cuts announced inside recovery prepare will amount to 10bn euros, while tax rises will bring in a further 5bn euros.

The cuts include 2.8bn euros of savings in social welfare investing, 24,750 public sector jobs cuts and a 1 euro reduction inside minimum wage, to 7.65 euros an hour.

The tax rises include an extra 1.9bn euros from income tax changes, an increase in VAT from 21% to 22% in 2013, and to 24% in 2014, and a new "site value" property tax to raise 200 euros from most homeowners by 2014.

The government has already implemented 15bn euros of cuts inside last two years.

The measures have proved deeply unpopular with the electorate, and junior government partner, the Green Party, has called for a general election in January.

Voters go to the polls later in a by-election in Donegal to elect a new TD (MP) to the Irish Parliament.
Increased support

Opposition politicians are questioning the government's handling of the financial system, and in particular its continued denial last week that it would need financial assistance to help solve the country's debt crisis.

Despite the denials, the federal government asked for assistance at the weekend and is currently in negotiations with the EU and IMF over a bail-out package deal anticipated to become about 85bn euros.

The government has described the package deal as "an overdraft facility" that it can draw upon when needed.

Much of the money for the bail-out will come from the European Stability Fund.

European Central Bank council member Axel Weber said late on Wednesday that the fund could be increased if needed.