Jobs report eases US market, but EU feeling heat
A better-than-expected US jobs report helped abate selling pressures on Wall Street. But Europe's debt problems are pressuring EU officials to act.
European leaders came under heavy pressure on Friday to take decisive action to stem a spiralling debt crisis while a robust U.S. jobs report brought some relief to battered world markets.Skip to next paragraph
Subscribe Today to the Monitor
Fears of U.S. recession and the spreading euro zone crisis has wiped $2.5 trillion off world stocks this week.
Better than expected U.S. jobs growth in July helped Wall Street open higher, gaining back at least some of the previous session's sharp losses, but the Dow Jones Industrial Average soon subsided to stand flat on the day.
Discord among EU policymakers over how to stop a disastrous spread of the crisis to Italy and Spainhas caused increasing frustration among investors who have also been spooked by fears that the United States could slip into recession.
Most notably, the European Central Bank disappointed markets by buying Irish and Portuguese bonds but not government paper in Italy and Spain where bond yields have blown out this week on fears that they may need bailing out.
"Would the ECB please get serious," Berenberg private bank said in a note reflecting global concern. "We need a circuit breaker to stop the vicious circle in which fear feeds on fear."
The ECB is holding back help for Italy and Spain, the euro zone's third and fourth biggest economies, to force them to toughen austerity measures, including bringing them forward.
Italy's austerity package has been criticised for back loading the most important measures until after an election scheduled for 2013, clearly for political reasons.
"Some of the reasons for these tensions relate to developments outside the euro area. Investor sentiment has been negatively affected by the impact of the debt ceiling negotiation in the United Statesand by recent data suggesting a softer patch in the global economy."
ECB executive board member Jose Manuel Gonzalez-Paramo joined the chorus calling for urgent and decisive action, although he said there was no need for panic.
French President Nicolas Sarkozy was to discuss the situation with German Chancellor Angela Merkeland Spanish Prime Minister Jose Luis Rodriguez Zapatero in separate telephone calls on Friday evening, his office said.
The ECB reactivated its dormant bond-buying programme on Thursday in an attempt to hose down the euro zone's deepening sovereign debt crisis, but only bought Portuguese and Irish debt. Influential members of the ECB opposed even that.