Concern for Budget Deficit Undermines Euro’s Strength

The euro continues its decline on concern that the rescue package, provided to Greece by the European Union government and which is valued as much as 45 billion euro, won’t be enough to deal with the nation’s debt.

The Greece’s budget shortfall is 12.9 percent of gross domestic product, which is four times the EU limit. The cost of insuring against the default on Greece’s debt increased today. At present time it looks like the bailout plan wasn’t been able to assuage the long-term fears of the default and, as a result, the investors and the trader are looking for the alternatives to the euro.

The concern about the threat of the budget shortfall may spread across the Euro-zone, further weakening the euro. The budget deficits may hit the European countries as they have spent billions on the stimulus programs.

EUR/USD dropped to 1.3382 today as of 16:00 GMT down from its opening level of 1.3433. EUR/JPY fell to about 124.77 after it opened at 125.21. EUR/GBP traded near 0.8689.

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