By Andrei Khalip
LISBON, Feb 5 (Reuters) – European policymakers scrambled on Friday to reassure markets about the stability of the 16-nation currency bloc as investors shed euro assets for a second day and Portugal backed a law that may push its swollen deficit higher.
European Central Bank Governing Council member Ewald Nowotny tried to play down a sharp fall in the euro, which hit its lowest level against the dollar since May 2009, and called talk of a euro zone breakup “absurd”.
Greek Prime Minister George Papandreou, on a visit to India, promised to “credibly apply” an austerity programme designed to bring his country’s yawning debt and deficit under control.
But worries about Portugal mounted after its opposition-led parliament defied the Socialist government and approved a bill on regional finances that could complicate the country’s budget consolidation drive.
Greece, Portugal and other bloc members with swollen deficits like Spain face intense pressure to get their public finances in order and calm markets worried about the risks of a sovereign default.