The German government met over the weekend with one aim in mind, cutting back on public spending. Borrowing is now at its highest level since WWII, and Germany needs to save some 10 billion euros a year between now and 2016.
Confidence also needs to be restored in the markets, which have again hammered shares and the euro this morning. Europe’s single currency is now at its lowest level in more than four years.
Investors are worried the global recovery may be stalling, and are pulling their cash out of riskier investments into safe haven plays like US treasuries, and with many buying up US debt the dollar rose to a 15-month high.
Tokyo continued where Wall Street left off on Friday, falling nearly four percent, its worst day for 14 months. The worries over growth hit commodity prices, too.
The pressure on the Euro increased at the end of last week when Hungary announced it might need a Greek-style rescue plan. Its finance minister said this morning there had been a failure in communication, and that Hungary’s economic fundamentals bear no resemblance to Greece’s. But investors do not seem to care.