The euro fell sharply against the dollar on Monday, to the lowest level since March as investors feared that the sovereign debt crisis in Europe would engulf larger eurozone economies.
The euro fell to as low as $1.39 on Monday prior to rebounding slightly and fell to its record low against the Swiss franc. And investors don’t expect the value to pick up any time soon.
Spain and Italy, specifically, fanned investors’ fears.
Spain’s ruling Socialist Party lost over the weekend to the conservative Popular Party in nationwide elections. Investors believe the political uncertainty dampens Spain’s ability to keep up its fiscal austerity going forward.
Credit rating agency Standard & Poor’s lowered its outlook on Italy’s sovereign credit rating from stable to negative, putting in doubt Italy’s ability to balance its budget next year. S&P cited political gridlock and poor economic outlook for its change in view of Italy’s financial fortunes.
S&P said, “Italy’s current growth prospects are weak, and the political commitment for productivity-enhancing reforms appears to be faltering, and potential political gridlock could contribute to fiscal slippage.”
But Italy’s ability to pass austerity measures haven’t been compromised even though there’s only a slim majority in Parliament. “Since the beginning of August last year when political tensions within the center-right majority were exacerbated, Parliament has managed to approve fiscal austerity measures and the 2011 Budget Law,” Barclays Capital wrote in a research note on Monday.
The euro fell to as low as $1.39 on Monday prior to rebounding slightly and fell to its record low against the Swiss franc. And investors don’t expect the value to pick up any time soon.
Spain and Italy, specifically, fanned investors’ fears.
Spain’s ruling Socialist Party lost over the weekend to the conservative Popular Party in nationwide elections. Investors believe the political uncertainty dampens Spain’s ability to keep up its fiscal austerity going forward.
Credit rating agency Standard & Poor’s lowered its outlook on Italy’s sovereign credit rating from stable to negative, putting in doubt Italy’s ability to balance its budget next year. S&P cited political gridlock and poor economic outlook for its change in view of Italy’s financial fortunes.
S&P said, “Italy’s current growth prospects are weak, and the political commitment for productivity-enhancing reforms appears to be faltering, and potential political gridlock could contribute to fiscal slippage.”
But Italy’s ability to pass austerity measures haven’t been compromised even though there’s only a slim majority in Parliament. “Since the beginning of August last year when political tensions within the center-right majority were exacerbated, Parliament has managed to approve fiscal austerity measures and the 2011 Budget Law,” Barclays Capital wrote in a research note on Monday.
