May 23 - Financial markets piled pressure on peripheral euro zone countries on Monday as investors worried about heightened risks in Spain and Greece and fresh concerns over Italy. Sonia Legg reports.
Supporters of Spain's Popular Party celebrate victory in local elections The ruling socialists have taken a battering and investors are nervous. It was the party's worst showing since the country returned to democracy in 1978. The government's ability to meet its deficit targets is now in doubt. As a result the premiums charged by investors to hold Spanish 10 year bonds rose to their highest level since January. And the euro briefly fell to a two-month low against the dollar. Spain's austerity measures are blamed for high unemployment. 45 percent of young people can't find work and anti-government protests in Madrid have been growing. (SOUNDBITE) (Spanish) PROTESTERS' SPOKESWOMAN, SAYING: "We will stay until there is a fair social change for the majority." Worries about Greece have also increased. It was downgraded again last Friday and the Greek government has been discussing ways to speed up its economic reforms. The crisis has fuelled speculation Greece will have to restructure its debt - something the European Central Bank has ruled out. (SOUNDBITE) (English): EWALD NOWOTNY, ECB MEMBER, SAYING: "We have a very clear position - we want the programmes that have been discussed just now to stay on track and that is our priority." Italy too is under pressure after Standard and Poor's cut its outlook over the weekend from "stable" to "negative". Italy has the euro zone's highest debt pile . And the government is now expected to bring forward to next month plans to cut the deficit by 35 - 40 billion euros. Ireland was the only struggling euro zone country to receive a bit of good news. President Obama visiting his great, great, great grandfather's Irish home promised to do all he could to help the country's economic recovery. Sonia Legg, Reuters