Market restrictions send euro into freefall

The euro hit a four-year low on Wednesday, and Greek shares led European stocks in a downward spiral. A German move to restrict speculation caused the currency drop, while Athens is gearing up for its fourth general strike of the year.

Reuters

The euro hit 1.2144 dollars in Tokyo after suffering a bad fall Monday and Tuesday.

In naked short selling people trade shares they have neither bought or even borrowed. It is illegal in the US and most Asian markets

One analyst told RFI investors are overreacting. The European Commission this morning backed Germany’s policy.

“People are getting a bit overexcited about it,” says London accountancy expert Tim Bassett. “It’s only a ban on naked short selling, which is already banned in a lot of markets. The market reaction is more to do with the mood people are in: any news is bad news.”

He added that a weak euro is actually in the interests of European governments. They have to cut public spending, which will have a deflationary effect. A weak currency is inflationary, which is a good counterbalance.

Greece managed to pay off nearly nine billion euros of debt on Wednesday with help from the IMF and EU.

But markets did not take comfort. Greek stocks dropped more than four per cent as Athens prepares for its fourth general strike of the year, which is scheduled for tomorrow.

It has to pay back another 8.6 billion euros next March and is scheduled to receive another 18 billion euros of emergency funding this year, on condition that it implements austerity measures.

Greece managed to pay off nearly nine billion euros of debt on Wednesday after a 14.5 billion payment from the EU and 5.5 billion from the IMF. In March next year Greece has to pay back 8.6 billion euros. It is to receive another 18 billion by the end of the year.

A fourth general strike on Thursday will shut down public services, schools, banks, ministries, trains and ports and reduce hospitals to emergency staff.