Euro slides on Greece fears

The euro fell to $1.3533, its lowest level this week, while the difference in interest between Greek 10-year bonds and their eurozone German benchmarks jumped from 406 to 426 basis points – near the record levels hit before the €45bn rescue package was announced.

“The market is still very much in doubt about the success of the EU bail-out plan and that’s putting the euro under pressure,” Ulrich Leuchtmann, head of foreign-exchange strategy at Commerzbank AG in Frankfurt, told Bloomberg. “It’s far from clear if the plan simply delays or solves Greece’s problems.”

However, Lorenzo Bini Smaghi, executive board member for the European Central Bank said the aid deal was a turning point in the crisis.

"This announcement makes it clear ... that a scenario of default and exit from the euro area, which some market participants and observers had toyed with, was simply absurd," he told journalists in Japan.

The package would be the biggest multi-lateral bail-out ever attempted, with an estimated €30bn in the first year from eurozone states and another €10-15bn expected from the IMF.

Doubts have centred on Germany's involvement in the rescue, with the country's public widely opposed to the deal and four professors preparing a legal challenge at Germany's constitutional court.

Olli Rehn, EU Economic and Monetary Affairs Commissioner, said he was confident Germany would step in if needed.

"I have no reason to doubt the German commitment if needed and if aid were to be requested," Mr Rehn said. He also dismissed fears of some investors over Greece's long-term solvency, saying: "There will be no default."

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