–Fin Mins To Scrutinize New Portuguese, Spanish Budget Plans

BRUSSELS (MNI) – With the euro at its lowest level against the
dollar since 2006, Eurozone finance ministers are set to discuss the
currency bloc’s sovereign debt woes here late Monday.

Investors worry that high debt levels in many of the Eurozone’s 16
member states will hold back the economic recovery and force some
members to seek a financial bailout.

Greece, which has the highest budget deficit in the Eurozone, has
already been promised aid worth over E110 billion over three years by
its Eurozone partners and the International Monetary Fund, and fears
abound over other high debt countries like Portugal, Spain and Ireland.

In spite of a E750 billion initiative to bail out troubled Eurozone
states and intervention by the European Central Bank, market fears about
possible debt defaults and the shaky economic recovery sent the euro to
$1.2234 in Asian trading Monday.

As part of the E750 billion deal, Portugal and Spain both agreed to
take more measures to trim their high debt burdens.

EU rules require member states to limit their budget deficits to 3%
of GDP and general government debt to 60%. But lax enforcement and the
recent recession, which curtailed tax income and saw an increase in
government spending, have left many of the EU’s 27 member states with
debts and deficits well above these targets.

Last week the Portuguese government said it will lower its deficit
to 7.3% of GDP this year and 4.6% by the end of next year, down from
2009’s 9.4%, by cutting public sector wages and increasing taxes. Spain
announced additional measures to slash its deficit from 11.2% in 2009 to
6% in 2011.

At tonight’s meeting, the finance ministers, together with European
Central Bank President Jean-Claude Trichet and European Commissioner for
Economic and Monetary Affairs, Olli Rehn, will debate these additional
measures as well as the creation of a special purpose vehicle to make or
guarantee loans to Eurozone states, if needed.

Eurogroup Chairman Jean-Claude Juncker will present the outcome of
the discussion to the press around 2000 GMT.

On May 9, the finance ministers agreed to create the special
purpose vehicle to lend or guarantee loans of up to E440 billion if one
of the Eurozone’s members fell in to financial difficulty. That move was
part of the broader E750 billion package.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$$CR$,MGX$$$]