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European stock markets recover poise after panic sell-off European stock markets recover poise after panic sell-off
(about 3 hours later)
Europe's financial markets have recovered their poise after Monday's panic sell-off, despite clashes in the Dutch parliament over the country's austerity measures.Europe's financial markets have recovered their poise after Monday's panic sell-off, despite clashes in the Dutch parliament over the country's austerity measures.
Share prices plunged at the start of the week, after left-winger François Hollande's strong showing in Sunday's first round of the French presidential election. Share prices plunged at the start of the week, after Socialist François Hollande's strong showing in Sunday's first round of the French presidential election.
Nervous investors fear that support for Hollande, and the surprise collapse of the Dutch government, reveal a growing Europe-wide backlash against the austerity policies Brussels believes are the only way of safeguarding the single currency.Nervous investors fear that support for Hollande, and the surprise collapse of the Dutch government, reveal a growing Europe-wide backlash against the austerity policies Brussels believes are the only way of safeguarding the single currency.
However, the Netherlands managed a successful debt auction on Tuesday, selling €2bn (£1.6bn)-worth of bonds in two minutes, suggesting financial markets have not lost confidence in the country's ability to fix its finances. However, the Netherlands managed a successful debt auction on Tuesday, selling €2bn (£1.6bn) of bonds in two minutes, suggesting financial markets have not lost confidence in the country's ability to fix its finances.
Analyst Lyn Graham-Taylor of Rabobank said the results were "by no means a disaster given we've seen the biggest upheaval ahead of a Dutch bond sale for many years".Analyst Lyn Graham-Taylor of Rabobank said the results were "by no means a disaster given we've seen the biggest upheaval ahead of a Dutch bond sale for many years".
The smooth running of the debt sale helped to restore a mood of calm to financial markets, and in London the FTSE 100 closed up 43 points, or 0.78%, at 5709, while the French market bounced by more than 2%, and the German DAX by more than 1%. The smooth running of the debt sale helped to restore a mood of calm to financial markets and, in London the FTSE 100 closed up 43 points, or 0.78%, at 5709, while the French market bounced by more than 2%, and the German DAX by more than 1%.
The Dutch political crisis deepened, however, as opposition politicians said they could not back the prime minister's budget plans, raising doubts over whether the country can meet the 3%-of-GDP deficit target imposed by Brussels. Without new spending cuts, the deficit is expected to be 4.6% of GDP. The Dutch political crisis deepened, however, as opposition politicians said they could not back the prime minister's budget plans, raising doubts over whether the country can meet the 3%-of-GDP deficit target imposed by Brussels. Without new spending cuts the deficit is expected to be 4.6% of GDP.
Mark Rutte, who offered his resignation as prime minister on Monday, had appealed for cross-party support to impose an austerity package worth between €14bn and €16bn. But socialist leader Emile Roemer said: "I understand that you have to bring finances in order but you cannot cut rigorously because it hurts the economy and people. Three percent is not feasible." Mark Rutte, who offered his resignation as prime minister on Monday, appealed for cross-party support to impose an austerity package worth between €14bn and €16bn, but Socialist leader Emile Roemer said: "I understand that you have to bring finances in order but you cannot cut rigorously because it hurts the economy and people. Three per cent is not feasible."
Geert Wilders, of the far-right Freedom Party, which had backed the government for 18 months before withdrawing its support over the weekend, said "we don't want to cut spending by €14bn and at the same time transfer billions of euros to Brussels for the horrible ESM [European Stability Mechanism] emergency fund and the weak Greeks". Geert Wilders, of the far-right Freedom Party, which had backed the government for 18 months before withdrawing its support over the weekend, said: "We don't want to cut spending by €14bn and at the same time transfer billions of euros to Brussels for the horrible ESM [European Stability Mechanism] emergency fund and the weak Greeks".
Rutte warned: "The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford. Those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters." The Dutch had previously been among the most hardline governments in arguing that other countries should stick to strict spending limits and be punished for breaking fiscal rules. Rutte warned: "The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford. Those are the facts and nobody can run away from them. I'm standing here without pretences, it is up to parliament and the voters."
The Dutch had previously been among the most hardline governments in arguing that other countries should stick to strict spending limits and be punished for breaking fiscal rules.
Fresh evidence of the impact of the latest austerity measures on Greece's recession-ravaged government came from Bank of Greece governor Giorgos Provopoulos, who predicted that the economy would shrink by 5% this year, with wages set to decline by another 10%.Fresh evidence of the impact of the latest austerity measures on Greece's recession-ravaged government came from Bank of Greece governor Giorgos Provopoulos, who predicted that the economy would shrink by 5% this year, with wages set to decline by another 10%.
The hefty price of the deficit-cutting measures Greece signed up to as part of its latest bailout deal, is helping to boost support for fringe political parties in the run-up to elections next month, which could make it hard to form a stable government. Unemployment in Greece is already above 20%. The hefty price of the deficit-cutting measures Greece signed up to as part of its latest bailout deal is helping to boost support for fringe political parties in the runup to elections next month, which could make it hard to form a stable government. Unemployment in Greece is already above 20%.
With Hollande pledging that he will seek to renegotiate the tough "fiscal compact" which allows Brussels to impose strict spending limits on eurozone member countries, there are growing fears in financial markets that the carefully negotiated Europe-wide deal that came alongside the rescue package for Greece could be about to collapse. With Hollande pledging that he will seek to renegotiate the tough "fiscal compact" which allows Brussels to impose strict spending limits on eurozone member countries, there are growing fears in financial markets that the carefully negotiated Europe-wide deal that came with the rescue package for Greece could be about to collapse.