The euro fell to a seven-month low against the US dollar today as investors continue to fret over the fate of several highly-indebted countries within the Euro zone. These countries – lumped together under the dubious PIIGS moniker – include Portugal, Italy, Ireland, Greece, and Spain, and more and more it appears that the only possible outcome includes either bankruptcy or a state-sponsored bailout. Naturally, neither result is ideal, but one thing that is certain is that the longer the fate of the PIIGS serves as a distraction, the greater the negative implications for the entire euro zone.
Yesterday, the European Union announced that it would continue to work with Greece to help the struggling nation cut it’s out-of-control deficit. Naturally, this resulted in two very predictable actions; investors continued to avoid Greek securities, and Greek workers took to the streets to protest any cut in government spending.
Meanwhile, Spain and Portugal struggled to find buyers for their debt. Spain was forced to raise premiums on a sale of three-year notes while Portugal actually pulled back its auction for treasuries yesterday due to a lack of investor interest.
Earlier today, European Central Bank President Jean-Claude Trichet announced that the ECB would maintain interest rates at the current 1.0 percent mark. He also noted that he is “confident†that Greece will reduce its deficit to acceptable levels. Whether or not this vote of confidence will make a difference with investors remains to be seen but with so many other more stable countries in which to invest, it’s hard to imagine private money finding its way to the troubled PIIGS.
