Eurozone majors move to cut deficits

amid renewed concerns that debt burdens may sink the single currency.
Italian lawmakers were set to discuss a constitutional amendment on a balanced budget, while the both the Italian and French grovernments were hurriedly preparing new deficit cutting measures to be adopted within days. A relief rally on the US Federal Reserve saying it would likely keep interest rates at ultra-low levels for the next two years quickly faded on Wednesday and the European and US markets fell sharply.

Pressure from the markets and the European Central Bank has seen a redoubling of deficit cutting efforts as the debt crisis that has already hit Greece, Ireland and Portugal threatens to ensnare core eurozone countries. On Wednesday, French President Nicolas Sarkozy cut short his holiday to announce new moves to slash France’s deficit and the country was hit by rumours it might be next after the United States to lose its top triple-A credit rating.

Sarkozy gave his finance and budget ministers one week to come up with new ideas for keeping France’s promises to slash its public deficit, with the measures to be decided upon on August 24. Concerns over an economic slowdown that has caused a major selloffs on global stock markets has also forced countries to increase or quicken cuts in order to meet their deficit reduction targets.

Market rumours that France was set to lose its triple-A rating were swifly denied by the government and Fitch promptly confirmed Paris’ top rating. Standard and Poor’s, which downgraded the United States last week, has also said the outlook for France’s triple-A rating is stable.
In Italy, Prime Minister Silvio Berlusconi has called parliament back early from summer holidays to vote on a constitutional amendment that would require a balanced budget. – AFP.