Conditions and doubts circle euro support package

Germany insisted that the president of its central bank become the next head of the European Central Bank in return for taking part in a 150 billion euro EU stability fund, according to a German newspaper. The German government has denied the claim. Markets were jittery as investors waited for details of the support plan.

Reuters

European Central Bank president Jean-Claude Trichet is due to step down at the end of next year.

Newspaper Handelsblatt added if Bundesbank president Axel Weber were to take over, he would become the second highest ranking German in the world, second only to the Pope.

The stability fund is designed as a safety net, in case another country needs emergency funds.

The euro fell in Asian trading amid doubts about the support package. European parliaments have not yet ratified the plan, and the details are still sketchy.

Greece is due to receive the first payment of 5.5 billion euros on Wednesday, the first instalment of a 110 billion euro bailout package from the EU and the International Monetary Fund.

The country's two main unions on Wednesday announced a new general strike for 20 May, which will be the fourth since February.

The unions are opposed to tax increases, spending cuts and pension reform that the government is imposing in order to access the bailout fund.

Meanwhile on Wednesday, Spain announced cuts to public sector salaries, cutting pay by 5 per cent and freezing it until next year for all but the lowest earners.

Prime Minister Jose Luis Rodriguez Zapatero, who announced a 50 billion euro austerity package in January, said the latest measure would have an obvious social impact.

The EU's budgetary watchdog on Wednesday gave a cautious welcome to dramatic cuts to public sector salaries announced by Spain, saying it was going "in the right direction."

Meanwhile, the Swedish prime minister Fredrik Reinfeldt said he opposed a proposal to impose budget restrictions on European Union countries.

"That this should concern all countries is something we find a little strange," he said. "Sweden is a shining example with good public finances and don't even come close to the limits one is not permitted to surpass. It is not fair to treat us in the same way."