Greece

The euro tumbled as debt woes spread around the euro zone from Greece, where pledges of austerity and fiscal rigor failed to stem growing fears that the Continent's economic recovery could be derailed, The Wall Street Journal reported. The euro fell as low as $1.4505 on Tuesday, its lowest level since early October. New worries about Austrian banking also roiled markets, with rumors of trouble at an Austrian lender with shaky investments in Eastern Europe following Monday's surprise nationalization of another Austrian bank at the behest of the European Central Bank.

Greece will attempt today to claw back some of its lost credibility with the EU and other international financial institutions by outlining drastic cost-cutting measures to reduce its runaway deficit, The Guardian reported. In a no-holds-barred interview, the finance minister, Giorgos Papaconstantinou, has pledged to resuscitate the economy – even if he believes its creditworthiness has been "unjustly" questioned. Greece is embroiled in the most serious fiscal emergency to hit the eurozone since the single currency was launched 10 years ago.

Greek Prime Minister George Papandreou said that European Central Bank President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker see “no possibility” of a Greek default. Papandreou was speaking to reporters at a European Union summit in Brussels, Bloomberg reported. “There is no possibility of a default for Greece,” Papandreou said today. He also said there was no possibility of Greece leaving the euro area.

German Chancellor Angela Merkel indicated Thursday that healthier members of the euro zone aren't prepared to abandon Greece and other heavily indebted countries in the currency bloc, The Wall Street Journal reported. Ms. Merkel's comments were the first by a senior European figure in recent days to focus on shared obligations among members of Europe's monetary union, after a flurry of statements by European politicians and ECB officials emphasizing Greece's need to act.

As economic indicators have improved, concern about the financial crisis has abated. But the next big problem could be approaching. Greece's public deficit is skyrocketing and the country may become insolvent. The effect on Europe's common currency could be dire, Spiegel Online reported. Greece has already accumulated a mountain of debt that will be difficult if not impossible to pay off. The government has borrowed more than 110 percent of the country's economic output over the years, and if investors lose confidence in the bonds, a meltdown could happen as early as next year.

Fears that Greece faces imminent bankruptcy are unfounded but the country must take "harsh" measures to shore up its economy, Eurogroup chairman Jean-Claude Juncker said on Sunday, Agence France-Presse reported. Greece's widening public deficit and a huge official debt has unsettled European market watchers, particularly regarding the standing of Greek government debt bonds. The concern intensified after the recent debt crisis in Dubai.

Greece does not face any bankruptcy risks, though the situation in the economy is worrying, Eurozone Finance Ministers said on Tuesday. They also noted that the Dubai debt crisis is unlikely to have a major impact on Eurozone banking system, RTT News reported. In a meeting held on Tuesday in Brussels, Eurozone finance ministers asked the Greek government to cut fiscal spending from its 2010 national budget to reduce the budget deficit. For 2009, Greece set a budget deficit target of 12.7% of GDP after October 4 elections. That was much higher than the 3.7% of GDP estimated earlier.

The problems of Greece's homes market pale in comparison with those of Spain and Ireland, but the pain is seeping through the economy. About 135,000 properties, mostly residential, remain unsold in Greece, compared with well over one million in Spain and about 70,000 in Ireland. Construction accounts for 11 percent of Greece's GDP -- a significant factor taking the economy into recession after years when Greece grew by about 4 percent annually, well above its euro-zone peers. This recession will be its first since 1993.