Spain’s underlying inflation rate turned negative in April for the first time on record, just as Prime Minister Jose Luis Rodriguez Zapatero pushes through the country’s biggest budget cuts in more than three decades.
The Greek debt swap negotiations that may produce relief for Athens are fueling concerns in Lisbon where an agreement would make it more likely Portuguese investors would be next in line to accept a loss.
French and Italian industrial production unexpectedly fell in October, underscoring the divide between Germany’s surging economy and the rest of Europe as the sovereign debt crisis threatens the recovery.
Portugal’s budget gap widened in the first eight months of the year, indicating the government may struggle to rein in the euro-region’s fourth-largest deficit as its borrowing costs surged to a record.
Rising bond yields for so-called euro area peripheral nations are working as a “discipline tool” by encouraging nations including Spain and Portugal to impose measures to cut their deficits, BNP Paribas SA said.
Italian and Spanish economic growth remained sluggish with weak domestic demand complicating efforts to convince investors the countries can expand enough to reduce debt and avoid becoming victims of Europe’s sovereign crisis.