The main European stock markets fell sharply this evening, while the euro dropped to a two-month low against the dollar, as Ireland's deal with the EU and IMF failed to ease worries that the euro zone debt crisis could spread.
This came despite comments from French government spokesman Francois Baroin, who said France and Germany were determined to save the euro and would not allow it to be taken hostage by the markets.
Baroin, who is also France's budget minister, said that an €85 billion bail-out for Ireland agreed at the weekend would prove 'sufficient and effective' in reassuring financial markets.
But on the bond markets this evening, the closely watched gap between the cost of borrowing for Spain and Italy and the German equivalent widened to new highs. Yields for Irish and Portuguese 10-year bonds remained high at 9.45% and 7.33% respectively.
Meanwhile, the euro was trading at just under $1.31 this evening. On stock markets, London's FTSE dropped 2.1% to close at 5,551. In Paris, the CAC fell 2.5% to 3,637, while in Frankfurt the DAX lost 2.2% to 6,698.
In Dublin, the ISEQ index lost earlier gains to end 11 points (0.4%) lower at 2,655. Banks were stronger, however, with Bank of Ireland and Irish Life & Permanent jumping after saying they hoped to raise the extra capital they need from their own resources. Bank of Ireland gained 16.3% to 31 cent, while Irish Life & Permanent surged 59% to 82 cent.
European worries also affected Wall Street, with the Dow Jones down 1.2% at 10,957 and the Nasdaq 1.3% lower at 2,501 this evening.
