European stocks rebounded Tuesday after sharp losses the day before on fears about Europe's debt crisis. But rising borrowing costs at bond auctions for Spain and Italy showed that debt fears still stalk the eurozone.
The tapering of stimulus by the U.S. Federal Reserve risks reigniting Europe’s debt crisis and pushing weak countries into a “debt-deflation spiral”, the International Monetary Fund has warned.
“The macro-economic environment continues to deteriorate. Recovery remains elusive,” said the IMF in its annual health check on the eurozone. “Growth has weakened further and unemployment is still rising. Mounting social and political tensions pose an increasing threat to reform.”
Brussels (AFP) - The eurozone slipped into deflationary territory in December for the first time since the height of the financial crisis in 2009, EU figures showed Wednesday, challenging the ECB to take action to avert a new economic crisis in Europe.
By Andrew Wilkinson:
Government bond prices continued to look tired following a stellar multi-week run higher in response to growing fears for the health of the global economy should Europe’s debt crisis worsen. Peripheral bond prices recovered and the single currency advanced propelled by investors chomping at the bit to buy equities following a slew of losses.