LONDON — Doubts rebounded Monday over Europe’s ability to solve its debt crisis and rescue the imperiled euro, as investors worried that plans for closer fiscal unity will bring little immediate relief and exposed the continent’s deep political divisions.
British Prime Minister David Cameron was the only leader among the European Union’s 27 members to refuse last week to join a plan under which nations submit their budgets for central EU review and limit the deficits they can run.
As the rift between Britain, which has its own currency, and the 17 nations that use the euro created uncertainty about the deal’s implementation, ratings agencies Moody’s and Fitch warned that the plan did not even properly address the problem of lowering existing European debt.
Stocks and the euro fell sharply Monday — to $1.3183 from $1.3370 — as market confidence in the plan and Europe’s ability to end the crisis ebbed. In Italy, one of the continent’s most troubled economies, workers angry about government austerity reforms went on strike and held nationwide rallies.
Cameron defended his actions in the House of Commons on Monday, telling U.K. lawmakers the fiscal pact that envisions using the EU’s executive arm as a budget watchdog could face even more political hurdles.
Under the deal, a central European authority would oversee nations’ future budgets and impose tougher spending controls. The participants would also agree to automatic penalties if countries spend too much.
Markets had initially rallied Friday on news of the deal — despite Britain’s refusal to take part — but that optimism soured Monday as traders sought more short-term support for European financial markets. They were also disappointed that the European Central Bank sharply cut back its purchases of government bonds to $841 million last week, underlining the bank’s stance that indebted governments should dig out of their own debt problems.
