Greece uncertainty continues to weigh

Date: Friday 12 Feb 2010

Uncertainty about the euro zone’s debt problems continued on Friday after European leaders pledged to help Greece but failed to explain how exactly it will be done.

The euro continued to fall and stock markets on the Continent were mixed today amid disappointment that the EU leaders resorted to a vague promise to take ‘determined and co-ordinated action if needed’ to help Greece instead of coming up with a solid rescue plan.

Economic figures showing that the euro zone expanded by just 0.1% in the fourth quarter of 2009 as struggling economies such as Greece held back growth in the 16-member currency zone added to the gloom.

The 27 member European Union, which includes countries that have their own currencies such as the UK, also registered growth of 0.1%. Both the euro zone and EU emerged from recession in the third quarter of 2009, registering growth of 0.4% and 0.3% respectively.

Greece, which has dominated the headlines lately as it seeks to resolve its debt situation, saw its economy contract by 0.8% in the fourth quarter, compared with 0.5% in the third quarter. Other countries still in recession include Spain, Latvia and Romania.

News that Chinese authorities are lifting the reserve requirements for banks by half a percentage point in order to cool down the economy didn't help euro-negative sentiment.

It is the second time this year the central bank raised banks' reserve requirements following a half-point increase in January.

The move means that major banks will now be required to keep 16.5% of deposits as reserves.

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