Greece Approves Austerity Plan; European Markets Down

Arthi Gupta
23 Jun, 2011
New York City

The European indexes slumped after the Federal Reserve lowered its growth forecast for the U.S. economy. European leaders meet in Brussels today to discuss the bailout plan for Greece. Euro-zone private sector expanded at the slowest pace since October 2009.

[R]1:30 PM Frankfurt – The European indexes slumped after the Federal Reserve lowered its growth forecast for the U.S. economy. European leaders meet in Brussels today to discuss the bailout plan for Greece. Euro-zone private sector expanded at the slowest pace since October 2009.[/R]

World stocks edged lower after the U.S. Federal Reserve lowered its growth forecast for 2011 and 2012 and gave no indication of further stimulus plans.

Chairman Ben Bernanke reiterated to keep its target for the federal funds rate at zero to 0.25% and said that rates are likely to remain at exceptionally low levels for an “extended period.”

""The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected,"" the Fed statement indicated.

Euro-zone private sector expanded at the weakest pace in twenty months in June. The latest survey by Markit Economics showed that the composite output index, that measures activity in both manufacturing and services, dropped more than estimated to 53.6 in June from 55.8 in the previous month. This was the lowest reading since October 2009.

China''s manufacturing activity moderated again in June, latest survey by Markit Economics showed Thursday.

The flash HSBC/Markit purchasing managers'' index fell to 50.1 from 51.6 in May. This was the lowest score in eleven months.

In Paris CAC-40 Index declined 55.74 or 1.44% to 3,815.45 and in Frankfurt DAX index edged lower 83.47 or 1.15% to 7,194.72.

The Greek cabinet on Wednesday approved a 2012-15 austerity budget plan and laws for its implementation, a condition crucial to secure further international aid.

The decision came a day after Prime Minister George Papandreou''s government survived a vote of confidence in Parliament, amid strong public protest against the harsh spending cuts.

Prime Minister George Papandreou''s next task will be to get the budget plan approved by the parliament, accelerate the privatization program by selling off government assets worth €50 billion by 2015 and implement additional spending cuts of €28 billion, preconditions for securing the next tranche of the bailout of €12 billion by July 13.

European leaders meet in Brussels today in a two-day summit to discuss the bailout plan for Greece.

Gainers & Losers

Intesa Sanpaolo SpA gained 0.2% to €1.86 after the lender said its €5 billion capital increase has been fully subscribed.

VERBIO Vereinigte BioEnergie AG plunged 4.10% to €3.30 after the company engaged in the production of biodiesel and bioethanol lowered its guidance for fiscal year 2011 due to weak sales of bioethanol.

Vinci SA fell 1.41% to €42.51 after the construction company said it signed a contract to build a head office complex for SFR, the mobile telecommunications unit of Vivendi, near the Stade de France in Saint-Denis, north of Paris.