We opened this week with the Euro continued its slide, falling below the 1.23 level in overnight trading, though recovering above that level in a correction, and then extending its decline as stocks in the US fell, with the Dow Jones Index down triple digits. Today’s low for the Euro was a 4-year low.

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Concerns over contagion of the Euro-zone debt crisis continue to hurt investor sentiment, and even if the Euro-zone Stabilization Package is able to lower the fear of solvency and default risk, the sharp austerity measures that debt-strapped countries will have to undertake will weaken growth prospects in the single currency zone.

While Euro-zone policy makers are saying the depreciation of the Euro is not a problem, the sharp pace of the fall is cause for concern.

Other factors to consider for the Euro-zone this week:

1. On May 19th, Greece has a deadline to pay back €8.5 billion in bond repayments. Greece paying back this debt should help soothe some concerns, but the impact may be limited.

2. The ECB’s bond purchase program; the ECB bought 16.5 billion in securities as of last Friday and to “sterilize” this intervention the ECB will have a tender on Tuesday to drain the liquidity pumped into the system.

3. Concerns over growth prospects and sharp cutbacks in government budgets could weaken wages and prices, with a threat of a debt-deflation spiral, especially in the PIIGS countries.

4. Could the events of the last month, and the increase in uncertainty in credit markets, short circuit the global recovery?

These questions will not be answered overnight or over the next week. The potential for a credit crunch event was prior to the Stabilization Package announced by the EU as the size of the package should stave off any liquidity concerns. Still the implications of the events of the past few weeks will reverberate for some time with increased volatility in the currency markets.