Euro slides prior to EU summit

European stocks and the euro slid yesterday as pessimism set in that the EU summit would not deliver a significant breakthrough on the eurozone debt crisis.

An early advance in European equities was halted by downbeat comments from German officials who poured cold water on hopes for a deal at a make-or-break two-day summit beginning today.

London’s FTSE-100 index of top companies ended the day down 0.39 per cent to close at 5,546.91 points, while in Paris the CAC-40 dipped 0.11 per cent to 3,175.98 points and Frankfurt’s DAX 30 dropped 0.57 per cent to 5,994.73 points.

Milan shed 1.24 per cent and Madrid 0.79 per cent.

The euro, which had earlier gained against the dollar, slid to $1.3391 from $1.3397 late in New York on Tuesday.

Wall Street was also down approaching midday, with the Dow Jones Industrial Average slipping 0.04 per cent to 12,145.09 points, while the broader S&P 500-stock index shed 0.33 per cent to 1,254.33 points and the tech-rich Nasdaq Composite tumbled 0.40 per cent to 2,639.03 points.

A German government source said yesterday he had become “more pessimistic” in recent weeks for a “total agreement” at the summit.

The source said that “several partners have not yet understood the gravity of the situation” facing the EU. Later German government spokesman Steffen Seibert said: “From the German point of view, there is also a very challenging agenda for this summit... we are expecting very challenging and occasionally very difficult talks.”

“These statements made the markets very nervous,” said trader Eric Hassid at Aurel BGC brokerage. “There are even rumours circulating that they won’t reach an agreement by Friday.”