Debt-saddled Europe buckles down

Governments across Europe took further action against ballooning debt levels Thursday, the latest attempts to contain a crisis that threatens the continental economy.

A delegation from the International Monetary Fund, the European Central Bank and the European Commissionpraised Greece for the progress it has made in getting its federal deficit under control.

"Fiscal developments are positive," the delegates said in a joint statement from Athens on Thursday. "The state budget deficit was lower than was projected."

The team, which arrived on Monday, is to return in late July for an additional checkup on whether Greece is living up to its end of the bargain after the three bodies extended itan unprecedented $136 billion US lifeline in April.

Greece received its first instalment of those funds in May, and is on track to receive a second payment in September providing the July inspection proves satisfactory. It has pledged to hack its budget deficit from 13.6 per cent of GDP in 2009 to 2.6 per cent by 2014.

The centre-left government has dealt with near open revolt in the streets for weeks, as tough austerity measures including tax hikes and drastic cuts to salaries and public programs.

Spain sells bonds

Elsewhere on the continent,Spain's economy got a vote of confidence from the bond market as the country sold more than $4 billion US of treasuries to investors albeit at higher than normal interest rates.

Spain sold more than $3 billion US worth of 10-year government bonds at an average of 4.86 per cent. That's well above the 4.045 per cent it offered in May. It also solda little under $1 billion US worth of 30-year bonds at 5.9 per cent, well above the 4.8 per cent it offered in March.

Both auctions were oversubscribed by roughlytwo times, meaning there were twice as many people willing to buy at those rates than there were bonds available to sell.

Spain has been racked by the same worries over its budget deficit. Concerns reached a fever pitch in late May when the government stepped in to save Andalusian savings bank Cajasur. Spanish officials have moved repeatedly to deny news reports that a financial rescue is under discussion for them, too, but doubts remain.

Even the comparatively healthy German economy responsible for more than a quarter of Europe's $16-trillion US economy is not immune. German Chancellor Angela Merkel plans to carvenearly $100 billion from government spending over the next four years.

Concerns are so widespread across the continent that the EU pledged Thursday to publish the results of "stress tests" on multinational banks. In an attempt to assuage investors, officialsfrom many EU nations said they'd release the results on roughly 25 banks in July.

Public anger over bailing out banks is much more palpable in Europe than in Canada, where no bank has failed in decades. French President Nicolas Sarkozy repeated on Thursday that EU leaders will renew their call for a tax on financial transactions a so-called "bank tax" when G20 leaders meet in Toronto next week.

That's sure to rankle finance officials in Canada, who have been pushing for an "embedded contingent capital" system of self-insuring banks against their own failure.

Finance Minister Jim Flahertywon support from countries such as Australia, Mexico and Russia at meetings in South Korea earlier this month to keep the bank-tax lobby from gaining steam, but comments out of Europe Thursday seem destined to bring the issue to a head in Toronto next week.