Merkel faced trouble at home as opposition politicians joined Mr Hollande in his
bid to make the austerity pact more flexible. They complain that the
"one-size-fits-all" rules do not suit Germany's individual states and
municipalities. The question of how to address the eurozone's debt burden is
toppling governments across Europe. The three-month-old Romanian government fell
on Friday as it lost a no-confidence vote over state asset sales. Against a
backdrop of rising concerns, the pound hit a two-and-half-year high against a
basket of currencies tracked by the Bank of England. Italy, the eurozone's third
largest economy, paid more to get auctions of its government debt away on Friday
morning. It paid yields, or implied interest rates, of 5.84pc on its 10-year
bonds, up from 5.24pc last month. Separately, Ireland slashed its growth
forecast for this year from 1.3pc to 0.7pc.
MADRID - Spanish officials moved to
shore up confidence in the ailing local economy after new data showed
unemployment at an 18-year high, after credit-ratings firm Standard & Poor's
slapped Spanish government debt with a two-notch downgrade. Spain's statistics
bureau Friday said the country's jobless rate rose to 24.4% in the first
quarter, from 22.9% in the fourth quarter of last year, inching toward its
highest level on record. More than half of workers under 25 years old were
without jobs. In the first quarter of 1994, Spanish unemployment reached 24.6%.
Spain's government said its program of economic reform will benefit the country
after it was hit by a credit rating downgrade by Standard & Poor's and
figures showed unemployment had hit an 18-year high. "The figures are terrible
for everyone and terrible for the government," Foreign Minister José Manuel
Garcia-Margallo said in a radio interview. "Spain has been, and is, in a crisis
of huge proportions." Spain's labor market has been hard hit by the collapse of
a decadelong housing boom and by budget cuts that are removing tens of billions
of euros from the economy. In addition, rigid labor laws make it easier to
dismiss workers than to adjust their wages or change their duties. Spain's
unemployment rate is more than double the 10.7% euro-zone average, and now
totals about 5.6 million people.
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As polls in Ireland revealed last week, support for the coalition government's policies is collapsing, while backing for Sinn Féin – which is calling for a "no" vote in next month's referendum on the EU fiscal compact that would bind member states other than the UK, which opted out, to budget deficits of 3% or less in perpetuity – has propelled it into the rank of Ireland's second most popular party after Fine Gael. Whether there will still be a fiscal compact to vote on, when the Irish go to the polls, is a moot point. The likely winner of the second round of the French presidential elections next Sunday, the Socialist, François Hollande – who some polls put nine points ahead of the incumbent, Nicolas Sarkozy – has said he would revise the deal.
In recent days, the Dutch coalition government has been brought down by the departure of Geert Wilders's far-right Freedom party, which was unwilling to sign up to a budget in line with the EU's belt-tightening package, even though the Dutch government has been one of the most aggressively in favour of imposing harsh austerity measures on members such as Greece and Portugal. Indeed, opinion polls in the Netherlands suggest that if elections – set for September – took place today, parties opposing the austerity regime might, both to the left and far right, win up to a third of seats.
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