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| Eurozone collapse 'inconceivable' | |
| (40 minutes later) | |
| The head of the European Union's (EU) main bail-out fund has dismissed the possibility of a break up of the 16-nation eurozone. | |
| Klaus Regling of the European Financial Stability Facility said it was "inconceivable that the euro fails". | |
| There has been speculation that some countries may be forced to give up the euro in light of the Irish debt crisis. | |
| The currency has fallen by more than three cents against the dollar this week because of events in the Republic. | |
| Bail-outs | |
| Mr Regling told Germany's Bild newspaper there was "zero chance" that the euro would collapse. | |
| "No country will voluntarily give up the euro - for weaker countries that would be economic suicide, likewise for stronger countries," he said. | |
| Questions have been raised about the cost to the EU, and the International Monetary Fund, of bailing out eurozone members - over the summer, Greece was bailed out to the tune of 110bn euros ($147bn; £93bn), while the Irish Republic is currently negotiating what is expected to be an 85bn-euro rescue package. | |
| Many commentators have also pointed out that member countries are unable to devalue their own currency - one of the key methods many governments use to trade their way out of recessions, as a weaker currency makes exports cheaper. | |
| As a result, some have suggested that countries like the Irish Republic and Greece would be better off outside the zone. | |
| Investor doubts | |
| Mr Regling's comments came as the euro slid by more than half a cent against the dollar to $1.3314, as investors digest the Irish Republic's austerity plan unveiled on Wednesday. | |
| The four-year plan is designed to save 15bn euros ($20bn; £13bn) through spending cuts and tax rises, but investors remain unconvinced. | |
| The austerity measures are designed to reduce the Republic's budget deficit, which is the highest in the eurozone. | The austerity measures are designed to reduce the Republic's budget deficit, which is the highest in the eurozone. |
| However, there are doubts about the Irish government's growth estimates, which directly impact its deficit forecasts - many investors see them as overly-optimistic. | However, there are doubts about the Irish government's growth estimates, which directly impact its deficit forecasts - many investors see them as overly-optimistic. |
| The government still expects the economy to average 2-2.5% growth in 2011, and 3.5-4.5% the year after, whereas rating agency Standard & Poor's has said it expects virtually no growth over the next two years. | The government still expects the economy to average 2-2.5% growth in 2011, and 3.5-4.5% the year after, whereas rating agency Standard & Poor's has said it expects virtually no growth over the next two years. |
| There also are also doubts about the whether the government will be able to push through its austerity measures when parliament votes on the budget on 7 December. | There also are also doubts about the whether the government will be able to push through its austerity measures when parliament votes on the budget on 7 December. |
| Compounding this uncertainty are fears that the Irish debt crisis will spread to other countries with high deficits, in particular Portugal and Spain. | Compounding this uncertainty are fears that the Irish debt crisis will spread to other countries with high deficits, in particular Portugal and Spain. |
| All these factors are putting pressure on the euro. | All these factors are putting pressure on the euro. |
| Irish government bond yields have also risen further, to above 9%, suggesting investor confidence in the country's economy has slipped since the recovery plan was announced. | Irish government bond yields have also risen further, to above 9%, suggesting investor confidence in the country's economy has slipped since the recovery plan was announced. |
| However, yields on Spanish and Portuguese debt were virtually unchanged, as were those on bonds issued by Belgium, the latest country to be linked with potential debt problems. | However, yields on Spanish and Portuguese debt were virtually unchanged, as were those on bonds issued by Belgium, the latest country to be linked with potential debt problems. |
| Tax rises | Tax rises |
| In total, the spending cuts announced in the recovery plan will amount to 10bn euros, while tax rises will bring in a further 5bn euros. | In total, the spending cuts announced in the recovery plan will amount to 10bn euros, while tax rises will bring in a further 5bn euros. |
| The cuts include 2.8bn euros of savings in social welfare spending, 24,750 public sector jobs cuts and a 1 euro reduction in the minimum wage, to 7.65 euros an hour. | The cuts include 2.8bn euros of savings in social welfare spending, 24,750 public sector jobs cuts and a 1 euro reduction in the minimum wage, to 7.65 euros an hour. |
| The tax rises include an extra 1.9bn euros from income tax changes, an increase in VAT from 21% to 22% in 2013, and to 24% in 2014, and a new "site value" property tax to raise 200 euros from most homeowners by 2014. | The tax rises include an extra 1.9bn euros from income tax changes, an increase in VAT from 21% to 22% in 2013, and to 24% in 2014, and a new "site value" property tax to raise 200 euros from most homeowners by 2014. |
| The government has already implemented 15bn euros of cuts in the last two years. | The government has already implemented 15bn euros of cuts in the last two years. |
| The measures have proved deeply unpopular with the electorate, and junior government partner, the Green Party, has called for a general election in January. | The measures have proved deeply unpopular with the electorate, and junior government partner, the Green Party, has called for a general election in January. |
| Voters go to the polls later in a by-election in Donegal to elect a new TD (MP) to the Irish Parliament. | Voters go to the polls later in a by-election in Donegal to elect a new TD (MP) to the Irish Parliament. |
| Increased support | Increased support |
| Opposition politicians are questioning the government's handling of the economy, and in particular its continued denial last week that it would need financial assistance to help solve the country's debt crisis. | Opposition politicians are questioning the government's handling of the economy, and in particular its continued denial last week that it would need financial assistance to help solve the country's debt crisis. |
| Despite the denials, the government asked for assistance at the weekend and is currently in negotiations with the EU and IMF over a bail-out package expected to be about 85bn euros. | Despite the denials, the government asked for assistance at the weekend and is currently in negotiations with the EU and IMF over a bail-out package expected to be about 85bn euros. |
| The government has described the package as "an overdraft facility" that it can draw upon when needed. | The government has described the package as "an overdraft facility" that it can draw upon when needed. |
| Much of the money for the bail-out will come from the European Stability Fund. | Much of the money for the bail-out will come from the European Stability Fund. |
| European Central Bank council member Axel Weber said late on Wednesday that the fund could be increased if needed. | European Central Bank council member Axel Weber said late on Wednesday that the fund could be increased if needed. |
| "Seven hundred and fifty billion should be enough to assure the markets," Weber said. | "Seven hundred and fifty billion should be enough to assure the markets," Weber said. |
| "If not, it will have to be increased." | "If not, it will have to be increased." |