Business Blog Posts

Spain's first general strike for eight years disrupted public transport and some factories but seemed unlikely to make Socialist Prime Minister Jose Luis Rodriguez Zapatero back down on wage cuts, spending curbs, pension and labor market reforms.

The European Trade Union Confederation said at least 100,000 people were due to join a pan-European protest march in Brussels but analysts said the actions were too small and disjointed to sway debt-laden governments obliged to cut public deficits.

Under pressure from investors who fear another Greek-style meltdown, Ireland was preparing to announce a massive bill for rescuing stricken Anglo Irish Bank, while government and opposition leaders in Portugal wrangled over spending cuts and tax hikes to narrow that country's yawning deficit.

European Commission President Jose Manuel Barroso said the situation in his native Portugal was serious and the government had to stick to its fiscal targets.

"Portugal has to show responsibility," he said, adding that markets believed the government was "shilly-shallying."

The European Union executive outlined plans to prevent any repetition of Greece's debt crisis by making repeat deficit offenders deposit 0.2 percent of their gross domestic product with Brussels.

The interest-bearing deposit would be converted into a fine unless the country in breach took effective action to cut the budget gap below EU limits.

If a country repeatedly ignores recommendations to rectify severe economic imbalances in wage, macroeconomic and fiscal policy, it will incur a yearly fine of 0.1 percent of GDP, until EU finance ministers decide corrective action has been taken.

"(For) the euro area, changes will give teeth to enforcement mechanism and limit discretion in the application of sanctions," the Commission said in a statement.

"Sanctions will be the normal consequence ... for countries in breach of their commitments."

The proposals require approval by EU heads of government and the European parliament with Germany and France apparently at odds about how automatic the application of penalties should be and whether politicians should retain the final say.

RETHINK?

Euro zone markets steadied with the risk premium on Irish and Portuguese government bonds over benchmark German Bunds off Tuesday's peaks, although the cost of insuring Portuguese sovereign debt against default hit a new high.

Banks took far less three-month liquidity than expected from the European Central Bank, soothing some market fears.