PARIS (AFP) - – The financial cloud hanging over Europe darkened as the single currency slumped, and borrowing costs rose in tandem with investors' anxiety about eurozone debt.
In the wake of bailouts for Greece and Ireland, political leaders scrambled to end damaging speculation that larger European countries could default and plunge the eurozone into a potentially fatal crisis.
As Spain and Italy -- two of Europe's biggest hitters -- saw their borrowing costs rise, European Central Bank President Jean-Claude Trichet tried to face down the speculation.
"Observers are tending to underestimate the determination of the (eurozone) governments and the EU as a whole," Trichet told the European Parliament. But markets gave a cool reaction. The euro dipped under the symbolic floor of 1.30 dollars for the first time in over two months as investors saw further eurozone instability.
At CitiFX, a branch of Citigroup, analyst Valentin Marinov said the fall of the euro signaled "that investors remain more focused on potential contagion to other eurozone countries than they do the situation in Ireland," which recently agreed to a bailout. "A failure from the euro to rally on this development (the Irish rescue) suggests investors do not believe the package goes far to averting strains in countries such as Portugal and Spain."
That disbelief was visible on Europe's bond markets on Tuesday.
The yield -- the rate of return -- on 10-year Spanish debt rose above 5.50 percent from 5.46 percent late on Monday as the gap between Spanish and German rates reached new highs.
Spain's deputy finance minister Jose Manuel Campa insisted the gap was temporary as he vowed to press ahead with unpopular deficit-reducing reforms.
"These are short-term fluctuations. We are currently in a period of turbulence. What is important is to execute planned policies and the markets will respond," he said.
Italy too came under market pressure with the spread between its 10-year rates and Germany's also hitting new highs.
"Objectively, on the basis of Italian fundamentals, the reaction seems excessive," said Marco Valli, an economist with UniCredit bank.
Focus: Bonds, 'haircuts', savers and their shirts
"But the market is panicking, which could mean that the eurozone crisis of confidence has entered a more dangerous phase."
News that ratings agency Standard & Poor's could soon cut Portugal's credit rating did little to ease jitters.
S&P put Portugal on a credit watch, citing "increased risks to the government's creditworthiness" as growth was expected to falter and amid changes to EU rules that could force private bondholders to take on the cost of bailouts.
At Pimco, a fund heavily invested in government bonds, chief executive Mohamed El-Erian, warned "the longer the uncertainty over how investors will participate in losses lasts, the greater the probability that they withdraw from the market." Trichet agreed that markets needed greater clarity from EU political leaders and said the rules would not automatically demand that private investors bear losses.
"These rules are no less and no more than those which already exist at a global level," he noted.
B I L D E B E R G = global threat
That's when we have to talk about this stuff again. For everyone who reads this...you have to research the history of this group...and fast...I would...Basically one of their last meeting brought the subject of that stupid European currency. THEY (and the banks) have created it...and they are now looking at...destroying it ! I'm not bullshitting...If you think I am look them up on the internet...amongst the people I know...I was the only one to question the introduction of the European currency...people just took it at face value...That's the power that those guys have...over us...Now their latest is that maybe...they want to scrap it...one thing is certain...the US DOLLAR is getting weaker...the U S are getting weaker...from an economic viewpoint. The Euro-Block which allegedly had been created to counteract or oppose the strength of the US is ...damaged in some ways but still very much a force !
If we let those guys control our finance again, they're capable of the worst ! and I mean that...
What you have to understand first off is the control that Freemassons have over the world and I'm not paranoid at all...when I say that...every little fucker that comes up with that is a numbskull...everyone that questions issues such as 9/11 or the BILDEBERG or the massons gets called a PARANOID schizo...but, a little information on how powerfull these groups are can only be good in one's life. I'll stop here...remember...BILDEBERG...and Obama NWOrder...se what they have to say and what they're up to...