European exchange traded funds were back under pressure Thursday after a brief respite as the sovereign debt crisis refuses to exit the financial headlines.
The regional and single-country ETFs were losing ground in U.S. trading Thursday after the European Central Bank held steady on interest rates. However, ECB President Jean-Claude Trichet said inflation risks in the region are balanced but economic risks are to the downside.
ETFs focused on Spain, Italy and France stabilized a bit earlier this week on news that lawmakers had approved key finance reforms in three of Europe’s major capitals.
Spanish, French and Italian parliaments took to approving their government’s austerity packages despite broad opposition. Germany’s top court cleared rescue packages for top economies, avoiding economic disaster, reports Perth Now.
German Chancellor Angela Merkel claimed vindication from the ruling, however, there is less room for her to move in the coming months. [Spain ETF in Focus After Bond Auction]
“Sweeping all the problems under the carpet and talking about solidarity won’t bring us stability,” Merkel told parliament after her decision.”The problems of a single country can imperil the currency. That is why I say we need more Europe.”
The iShares MSCI France Index (NYSEarca: EWQ), iShares MSCI Italy Index (NYSEArca: EWI) and iShares MSCI Spain Index (NYSEArca: EWP) were suffering losses of about 2% on Thursday. [European ETFs Stabilize After Big Drop]
Vanguard European ETF (AMEX: VGK), a broader regional fund, also slipped 2%.
Italy’s austerity package aims at cutting the country’s deficit by $70 billion over the next three years, while Spain will have to keep future budget deficits at a tight limit. Nicholas Sarkozy, France’s President, is trying to follow in Spain’s “golden rule” lead and push through a balanced budget amendment. [The Contrarian: Single Country ETFs]
Vanguard European ETF
Tisha Guerrero contributed to this article.