Fear Of Budget Shortage Strangles Euro

The euro sank today to almost the lowest level in a year against the U.S. dollar as the possibility that Greece will be forced to activate the rescue package increased after the announcement that the Greece’s deficit the last year was higher than previously estimated.

After the meeting of the European leaders with their Greek counterparts, which was held to discuss the proposed bailout, the report showed that the nation’s budget shortage was 13.6 percent of gross domestic product in 2009, higher than previously estimated. The Greece’s government may delay or cut payments to bond investors during the negotiations about the terms of the bailout.

The growing concern about the Greece’s budget deficit and worries that other European countries will experience the same problem drives the euro these days. Until the European Union’s government find the way to lessen these fears the euro will remain inherently weak.

EUR/USD traded near 1.3298 as of 16:07 GMT today, falling from its opening level of 1.3389. EUR/JPY traded at 123.77 after it opened at 124.76.

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