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Euro drops after Europe bailout

A trader sits in front of a board displaying the German share index DAX at the Frankfurt Stock Exchange.

The Euro dropped in the markets a day after the approval of Europe's near-$1 trillion bailout. Global stocks soared yesterday on the announcement of the package, marking the Euro's value at $1.30. The Euro is down to $1.27 this morning in early trading.

Terry Smith is CEO of brokerage firm Tullet Prebon said the markets will continue to behave nervously. "When you've got a government and they lay out what their plan, if any, is for the reduction of the deficit, that's the moment when the judgment will really be coming," he said.


TEXT OF INTERVIEW

Steve Chiotakis: Most European markets have been falling today, just a day after the continent announced a near-$1 trillion rescue plan. From London, Marketplace's Stephen Beard is with us live to talk about it. Hi Stephen.

Stephen Beard: Hello Steve.

Chiotakis: We see the Euro is slipping against the dollar. Why are investors losing their enthusiasm?

Beard: Because the rescue package doesn't solve the fundamental problem here, that some of the governments that use the Euro -- like Greece, for example -- borrowed too much money, they're struggling to pay it back. And in the case of Greece having huge trouble trying to reduce its debts by cutting its public spending, as we've seen. The Greek people are in uproar. It may sound ridiculous describing a trillion-dollar package as a band-aid, but that's what it is, says Steve Barrow of Standard Bank:

Steve Barrow: The package that we have papers over the cracks, because it generates cheaper loans for various countries. But I think those cracks are still very much there, and now those cracks will undermine the Euro going forward.

Chiotakis: All right Stephen, but $1 trillion is a big chunk of money, I mean it must be buying something.

Beard: Yes, I mean the promise of it buys time, breathing space. But for how long? There are some uncomfortable questions here. For example, will all this money be forthcoming? When the U.S. bailed out its banks, it took the decision, then took the action. But we don't have one government here in the Eurozone -- we've got 16 different governments. There's always the danger of disagreement of the 16 falling out. There are big doubts about Germany's willingness to contribute. So yesterday's package certainly doesn't end the Euro crisis.

Chiotakis: Marketplace's Stephen Beard in London. Stephen, thanks.

Beard: OK, Steve.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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