Payrolls dropped by 36,000 last month after a revised 26,000 decrease in January, a Labor Department report showed yesterday in Washington. The jobless rate, which has not increased since October, held at 9.7 percent, even as more people entered the workforce.

Stocks and the dollar rallied while Treasuries fell as investors reckoned the economy would have added jobs were it not for seasonal snowfall records in cities including Baltimore and Philadelphia. The U.S. needs employment growth to sustain a recovery from a recession that has cost 8.4 million jobs since December 2007.

“The weather effects were enough to transform what would’ve been a positive into a negative,” said David Resler, chief economist at Nomura Securities International Inc. in New York, referring to payrolls. “Job growth is happening as we speak. Companies are seeing a stabilization of demand.”

The Standard & Poor’s 500 Index rose 1.4 percent to close at 1,138.7 in New York. The dollar strengthened 1.4 percent to 90.3 yen from 89.02 the previous day. The yield on the 10-year Treasury note rose to 3.68 percent at 4:24 p.m. in New York from 3.60 percent late the prior day.

Payrolls were forecast to decrease by 68,000, according to the median estimate of 82 economists surveyed by Bloomberg News. The jobless rate was projected to increase to 9.8 percent.

Technology Services

Among companies adding workers is Accenture Plc, the world’s second-largest technology-services provider, which plans to boost payrolls by about 50,000, with as many as 9,000 jobs being added in the U.S. by the end of August.

“We are seeing a very broad uplift globally” in demand, John Campagnino, director of worldwide recruiting, said in a March 3 interview. He said the trend “brings us right back to the pre-recession” levels.

The number of temporary workers increased by 48,000 in February, the fifth straight monthly gain. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff.

Christina Romer, President Barack Obama’s chief economist, told Bloomberg Television yesterday that it’s “very realistic” to expect employment growth in the U.S. in the next few months. Even so, “anyone that goes out and talks to people across this country knows that the labor market is still very distressed.”

Factory Payrolls

Factory payrolls increased 1,000 in February after rising 20,000 in the prior month. The median forecast by economists called for a drop of 15,000. Payrolls at builders fell 64,000 after decreasing 77,000. Financial firms reduced payrolls by 10,000 after a 13,000 decline.

The labor market may be slow to recover from the biggest slump since World War II, giving the Federal Reserve scope to keep interest rates low and putting pressure on Obama and lawmakers to foster job growth.

“A lot of people are not seeing the kind of job gains or income gains that they are looking for,” John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said yesterday. “There is going to be a lot of dissatisfaction with politicians and that is giving rise to this political angst.”

Many companies have been reluctant to hire even after the world’s largest economy grew at a 5.9 percent annual rate in the last three months of 2009, the most in six years.

Underemployment Rate

Economists surveyed by Bloomberg last month projected the jobless rate will average 9.8 percent in 2010 and end the year at 9.5 percent.

The underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking — rose to 16.8 percent from 16.5 percent. The number of part-time workers for economic reasons climbed to 8.8 million in February from 8.3 million the previous month.

Two storms blanketed parts of the country in early February, the second coming during the week that included the 12th of the month, the government’s survey week.

Yesterday’s report showed 1 million Americans said bad weather prevented them from getting to work during the survey week. About 290,000 people on average say bad weather has prevented them from getting to work, according to February figures going back three decades.

Economists at Macroeconomic Advisers LLC in St. Louis projected the weather would reduce the payroll count by anywhere from 150,000 to 220,000 workers. The drop will probably be reversed this month, they said.

January 1996

The most recent storm of similar intensity that occurred during a survey week was in January 1996. The current data for payrolls that month, which have gone through several revisions since the initial estimate, show a 19,000 drop in employment followed by a gain of 434,000 in February.

Government payrolls decreased by 18,000 in February. State and local governments reduced employment by 25,000, while the federal government added 7,000. The increase at the federal level reflected in part the hiring of 15,000 temporary workers to conduct the 2010 census.

The Census Bureau said it will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. The program may have the biggest impact on payroll figures in April through June, when the bulk of the hiring will take place, and will then subtract from the job count the following months after the work is done.

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About 400 people attended the awards ceremony at the Westin San Francisco Airport in Millbrae. The program was co-produced by the Silicon Valley/San Jose Business Journal and the San Francisco Business Times.

The awards honor the in-house lawyers who keep the business world running but who rarely receive public recognition. Finalists were named in 10 categories in January.

“During this process we’ve learned firsthand the numerous roles these attorneys play at their respective companies,” said James MacGregor, publisher of the Business Journal.

“We look forward to recognizing more corporate counsel in the years ahead,” added Mary Huss, publisher of the Business Times.

Nominees were required to have been employed full-time by a company in the Bay Area and to have held their current positions for at least one year.

An independent panel of Bay Area lawyers helped choose the finalists, based on material submitted through the nomination process.

James Strother of Wells Fargo & Co. was presented a lifetime achievement award free credit scores.

Winners in the other categories are:

• Best General Counsel — Private Company: Hilary Krane, Levi Strauss & Co.

• Best General Counsel — Public Company (Annual Revenue Less Than $1 Billion a Year): Mary Doyle, Palm Inc.

• Best General Counsel — Public Company (Annual Revenue More Than $1 Billion a Year): Jim Brelsford, SanDisk Corp.

• Best IP Lawyer: Anirma Gupta, Intuit Inc.

• Diversity Champion: James Potter, Del Monte Foods Co.

• Best Labor & Employment Lawyer: Roxane Marenberg, Cisco Systems Inc.

• Best Biotech / Health Care Lawyer: Sandra Wells, Affymetrix Inc.

• Best Solo General Counsel: Rebecca Hlebasko, Bridge Housing Corp.

• Best International Lawyer: Harry Turner, Renesas Technology America Inc.

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“The central bank should consider underwriting debt to help the government create funds for fiscal stimulus,” Kamei said at a parliamentary hearing in Tokyo today. By law, the Bank of Japan is prohibited from buying debt directly.

Kamei’s remarks underscore the growing tension between the central bank and Prime Minister Yukio Hatoyama’s administration over how policy makers can fight price declines. Burdened by the largest public debt in the industrialized world, the government has little room to bolster spending and is urging the bank to take charge in beating the deflation that threatens the nation’s recovery from its longest postwar recession.

“The Bank of Japan is under siege with increasing government pressure and severe deflation,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo, who used to work for the central bank. “The market knows that bond purchases won’t be a panacea for deflation and they would hurt the BOJ’s independence.”

Having the central bank underwrite debt would give the government more access to funds, though it could also heighten investor concern about the nation’s fiscal discipline and drive bond yields higher. The yield on benchmark 10-year government debt rose to 1.31 percent at 1:13 p.m. today.

Fiscal Policy Needed

Kamei said the central bank alone won’t be able to eradicate price declines and that fiscal policy is also needed. Finance Minister Naoto Kan replied by saying fiscal discipline must always be exercised even though spending can help prop up the economy.

“It’s necessary to provide funds for bold fiscal spending” with direct purchases of debt from the central bank, said Kamei, who heads a junior coalition party. “Without fiscal stimulus funds, Minister Kan can’t resolve the economy’s output gap payday loans. He’s not a magician.”

The bank currently buys 1.8 trillion yen ($20 billion) of government debt from lenders each month. Bank of Japan Governor Masaaki Shirakawa has said the purchases are to provide liquidity and aren’t aimed at paying for government projects.

Kamei, head of the People’s New Party, has championed that increased government spending is key to spurring growth. Last year, he forced the government to delay unveiling a stimulus package he said was too small.

‘Show Its Commitment’

“Japan can’t overcome this economic crisis unless the Bank of Japan shows its commitment by going as far as” underwriting debt to pay for government spending, Kamei said.

Kan, a member of the ruling Democratic Party of Japan, has put heat on the central bank to do more to halt price declines and last month indicated he wanted Shirakawa to implement an inflation target. The finance chief said he wants to stamp out deflation as soon as this year and reiterated that he wants the bank to target inflation of 1 percent or higher.

“Given that various efforts to overcome deflation have failed, I won’t say we can immediately overcome this in a few months,” Kan said. “If I were allowed to be ambitious, I’d say I want prices to rise within the year” adding that “that is just my hope.”

Consumer prices excluding fresh food, the central bank’s key gauge of inflation, slid 1.3 percent in January from a year earlier, an 11th straight decline, the government said last week.

Shirakawa, also speaking to lawmakers, said he is committed to keeping policy very accommodative and that having the benchmark overnight lending rate at 0.1 percent has helped lower borrowing costs for companies.

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Mr. Toyoda acknowledged that the company had made mistakes and repeatedly apologized for the recent lapses in quality control. But he did not provide specific answers to questions about what the company knew about certain defects and when they were discovered.

Members of the House Committee on Oversight and Government Reform repeatedly asked Mr. Toyoda if his company had provided U.S. safety regulators with all the information they requested.

"According to my understanding, we fully shared the information we have with the authorities," Mr. Toyoda said, speaking through a translator.

Mr. Toyoda, who is the grandson of the company’s founder, read his opening remarks in English, but relied on a translator for the majority of his testimony. Yoshimi Inaba, the president of Toyota’s North America division, testified before the committee in English.

Committee members also peppered the executives with questions about why Toyota didn’t respond faster to customer complaints about sudden unintended acceleration.

In response, Mr. Toyoda acknowledged that the company’s efforts failed to live up to its core values and pointed to the company’s plans to set up a global commission to address complaints more quickly and efforts to increase transparency on safety issues.

However, some lawmakers did not find Mr. Toyoda’s answers sufficient.

Marcy Kaptur, D-OH, said she was "disappointed" with Mr. Toyoda’s testimony, adding that she did not feel he had shown sufficient remorse or taken enough note of the amount of complaints over the last decade.

The executives also came under fire for a 2009 memo in which Toyota staffers boasted of the company saving $100 million by negotiating a limited recall for certain cars.

Mr. Inaba, whose name appeared on the document, said the it was "inconsistent with the guiding principle of Toyota." He added that the report was made shortly after he rejoined the company and that he was not involved in writing it.

Toyota has been criticized for not responding quickly enough to customer complaints about sudden acceleration, which have been blamed for several accidents resulting in injuries or death. The automaker has recalled over eight million vehicles worldwide for this problem.

Mr. Toyoda attributed instances of unintended acceleration to certain factors, including the way the car is used or misused, and other "structural aspects." But he said he was "absolutely confident" that there are no defects with the design of Toyota’s electronic throttle control system.

After the nearly three hour hearing was over, Mr cash advance to savings account. Toyoda told reporters that he plans to make "sweeping changes" at the automaker.

"Going forward I intend to make every effort to achieve the transformation and rebirth of the company by making safety and ‘customer first’ the top priority," he said.

In response to the human toll of the company’s safety problems, Mr. Toyoda extended his condolences to members of the Salyor family, who lost four members in a crash involving a recalled Toyota vehicle in San Diego.

"I would like to send my prayers again," Mr. Toyoda said. "And I will do everything in my power to ensure that such a tragedy never happens again."

However, when asked if Toyota would pay for the medical or funeral expenses for drivers killed or injured in crashes involving defective Toyota cars, the executives hedged.

Mr. Inaba said the question will be resolved by the company’s legal team.

In his prepared remarks, Mr. Toyoda said the automaker’s rapid growth over the last few years contributed to the recent lapses in safety and outlined new steps the company will take to ensure quality control.

Toyota will devise a system to convey customer complaints from around the world to the company’s management in a timely manner, he said. It will also implement a system in which each region will be able to make recall decisions as necessary.

In addition, Toyota form a "quality advisory group" that Mr. Toyoda said will be "composed of respected outside experts from North America and around the world to ensure that we do not make a misguided decision."

Mr. Toyoda, who became the company’s president in June, said the automaker will "invest heavily" in quality in the U.S. and will establish an Automotive Center of Quality Excellence and will introduce the new position of Product Safety Executive.

Toyota has grown its sales in recent years, outpacing General Motors (GM, Fortune 500) as the world’s top-selling automaker. But its recent troubles have stained its reputation as a bright light in Japan’s otherwise stagnant economy.

Prior to Mr. Toyoda’s testimony, Department of Transportation secretary Ray LaHood testified before the House Oversight and Government Reform Committee. He defended himself against criticism for not having taken enough action concerning the faulty vehicles.

"We haven’t been sitting around on our hands," said LaHood. "When there needs to be a recall, we do it."

Aaron Smith, CNNMoney.com staff writer contributed to this report 

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The shares closed 2 percent higher after the developer paid HK$3.37 billion ($434 million) for the site in the eastern Tseung Kwan O district. The company raised HK$4.2 billion in a weekend apartment sale that attracted 120,000 prospective buyers in the city of 7 million.

The land auction and the weekend sale fanned speculation a bubble is forming in Hong Kong’s housing market, where home prices surged 29 percent in 2009 as low interest rates and an increase in buying by mainland Chinese stoked demand. Norman Chan, chief executive of the Hong Kong Monetary Authority, told lawmakers Feb. 1 that the city faces a “huge” potential risk of bubbles forming in its asset markets given high liquidity.

“The outcome is positive for the Hong Kong property market,” said Eva Lee, a Hong Kong-based property analyst at Macquarie Securities Ltd. “People expect 2010 won’t be an easy market given the strong growth last year, but the auction has reinforced their confidence.”

Sun Hung Kai spokeswoman Brenda Wong confirmed the company made the winning bid today. Price estimates for the auction ranged from HK$2.6 billion to HK$3.4 billion, and the median projection of five analysts Bloomberg News surveyed by phone and e-mail was HK$2.9 billion.

‘Reasonable’

Hong Kong is trying to ease a shortage in land supply and new properties that developer Cheung Kong (Holdings) Ltd. said last month may help raise home prices by as much as 20 percent this year.

Sun Hung Kai paid a “reasonable” price for the site, Victor Lui, executive director of Sun Hung Kai’s real estate broker, said by phone today. The price paid was “higher than expected but reasonable,” he said, adding he is “positive” about the outlook for the property market.

Sun Hung Kai plans to invest HK$6.5 billion on the plot of land in a medium-sized residential project, which may take between three and four years to complete, Lui said.

The developer at the weekend sold 900 apartments at the Yoho Midtown apartment complex in northwestern Yuen Long district for an average HK$5,400 per square foot, Amy Teo, Sun Hung Kai project director, said. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, according to Wong Leung-sing, an associate director at Centaline Property Agency Ltd.

Crowds Attracted

“All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,” said Buggle Lau, chief property analyst at Midland Holdings Ltd. “If more speculators enter the market then it could push prices up too high.”

The city had the world’s fastest-growing major housing market last year, according to a survey compiled by real-estate agents Knight Frank LLP.

Some 120,000 prospective buyers have flocked to the show homes since Feb. 19, Teo said, speaking at the display properties set up in a shopping center near the apartment complex in the city’s New Territories. Sun Hung Kai increased the number of apartments on sale to 900 from 700 because of demand, she said. The building complex has a total of 1,890 homes, according to Teo.

About 40 units were immediately advertised for resale at asking prices of as much as 20 percent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.

Supply

The number of private homes completed in Hong Kong last year fell 18 percent to 7,200 units, the lowest since 1997, the government said in a report Jan. 22.

The city’s home sales more than doubled in value in January from a year earlier to HK$36.2 billion, according to figures released by the government’s land registry. Sales gained 4.1 percent last month from December, the agency said.

The authority, Hong Kong’s de facto central bank, raised deposit levels for luxury apartments in October to try to cool lending. The government also plans to raise stamp duty, or transaction tax, on homes selling for more than HK$20 million to 4.5 percent from 3.75 percent in a bid to rein in the property market, the Chinese-language Sing Tao Daily said Feb. 11.

“Government intervention could lead to higher interest rates, but I can’t see mortgage rates much above 2.5 percent this year, which is unlikely to deter some buyers,” said Midland Holdings’ Lau.

Prices may rise as much as 15 percent in the first quarter, Centaline’s Wong said. Hong Kong’s Chamber of Commerce forecasts the city’s economy may grow between 3 percent and 4 percent this year.

“Given that the U.S. is unlikely to raise interest rates sharply and the yuan is under appreciation pressure, Hong Kong property prices may have substantial growth this year, but there is also a risk of a bubble,” said Benny Wong, executive director at Hong Kong-based Pan Asian Mortgage Advisory Company Ltd. “I expect the Hong Kong government will increase land supply this year in response to the high prices.”

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Analysts cautioned, though, that the gains could falter if consumer demand weakened.

The report on industrial production from the Federal Reserve showed gains in all three major categories: manufacturing, mining and utilities.

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China’s economy grew by 8.7% in 2009, even in the face of a global economic slowdown. Japan, which will report its full-year numbers on Feb. 14, is expected to slip behind China due to the steep decline in its economy in the first half of last year.

Both China and Japan are likely to end the year with a gross domestic product, the broadest measure of economic activity, of just over $5 trillion. To put that in context, that’s only a little more than a third of the size of the U.S. economy.

But with its huge population edge on the United States, many economists believe it is inevitable that China will eventually overtake the United States — even if it takes another 20 or 30 years.

"It’s kind of like the U.S. and Great Britain 125 years ago. Given how much larger we were, it was only a matter of time before we caught them," said Jay Bryson, global economist for Wells Fargo Securities. "And it’s only a matter of time before they catch us."

But there are still many limitations on China’s growth prospects. For those who are scared that the U.S. will fall behind its Chinese rivals sooner rather than later, it’s useful to think back a bit more than 20 years, when Japan was considered a similar threat to U.S. economic dominance.

John Makin, a visiting scholar specializing in Asian economies at the American Enterprise Institute, pointed out that in the late 1980s, Japan was "viewed as the unstoppable force."

Since then the Japanese economy has struggled mightily, suffering through the so-called "Lost Decade" of economic decline followed by a period of only weak growth after that.

Of course, there are differences between Japan in the late 1980s and China today. Most notably, Japan was already a fully developed economy two decades ago.

China is still an emerging economy, feeding off the growth that comes from massive public works projects designed to catch-up to the infrastructure already found in the United States, Europe and Japan, as well as consumers entering the middle class eager to buy their first car or household appliance personal business card.

Echoes of Japan’s problems. But there are plenty of similarities as well.

There are signs of a developing asset bubble in China’s housing and equity markets. China’s banking system has been dogged by questions about its transparency. There is also a dependence on exports that are supported by the government’s manipulation of the currency and limits on population growth.

All were factors in Japan’s troubles over of the last two decades.

The last year shows one of the problems with a country whose economy is greatly export driven. When the global recession hit, China’s exports were not spared, and it took about $586 billion in government spending, to fill the gap.

That turned out to be a much bigger share of China’s GDP than all the various bailouts and stimulus packages in the United States.

Lakshman Achuthan, managing director of Economic Cycle Research Institute, said China’s exports, driven by its cheap currency, makes it vulnerable to even lower-cost developing economies.

"A ‘Lost Decade’ is not an immediate issue for China, but they need to shift away from export dependence," he said.

Adding to these risks is the obvious fact that China is still a communist country where the government, rather than free markets, makes many decisions on the allocation of capital and resources. The free flow of information is also limited.

Most Western economists would argue that this it not conducive to long-term economic growth, even if government control of economic decisions can help to boost output in the short-term.

"It’s a bit like a very powerful but inefficient engine," said Makin. "They need to develop a way to allocate resources and capital that’s not driven by not a bunch of central planners." 

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Kulongoski said in a release late Thursday that leaders “do not intend to refer kicker reform and an emergency reserve fund to the November ballot during this special session, or anytime this year.”

The decision means residents will continue to collect refunds when money collected in Oregon’s general fund exceeds projections the state makes every two years.

It also means a major effort to restructure the state’s revenue system, a primary Kulongoski goal, won’t happen during the governor’s term. Kulongoski leaves office Jan. 1.

Kulongoski and several lawmakers from both sides of the aisle sought to change the kicker rules in order to build state reserves, then use that money to help defray effects from recessions and economic downturns.

Critics of the kicker say that because money is returned to state residents instead schools and public safety programs face peril when Oregon’s economy goes south no fax payday loans.

Kulongoski broached kicker reform as an olive branch to opponents of two tax measures that Oregon voters passed on Jan. 26.

“This decision by legislative leadership is disappointing and a missed opportunity for the people of Oregon who strongly support using a portion of the kicker revenues to build an adequate reserve for critical services,” Kulongoski said in his statement.

Kulongoski went as far to say that kicker reform is the Legislature’s most important issue during the short session, which will end around March 1.

“Oregonians deserve the opportunity to establish an emergency reserve fund in our state constitution that will help provide fiscal stability and certainty in the state’s budgeting process,” he said. “The people of Oregon deserve better.”

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So far, Dubai, Greece, Portugal and Spain have come under attack as investors demand higher interest rates on bonds sold by cash-strapped nations. For now, few observers expect to see defaults. But rising borrowing costs alone could exact a toll on already tepid economic recoveries.

What’s more, even deeper-pocketed issuers such as the U.S. and the U.K. could be paying much higher yields by next year, as they struggle with political squabbles about rising deficits fueled by a massive price tag for bailouts and stimulus.

"It all depends on growth," said Jan Randolph, director of sovereign risk analysis at forecasting firm IHS Global Insight. "Economic growth is the great redeemer in these sorts of situations, but it’s not at all clear that we can count on seeing enough growth in a lot of the heavily indebted countries."

Borrowing costs have soared over the past two months in Greece, and this week the deficit hawks have swooped down on two other southern European nations, Portugal and Spain.

Interest-rate spreads between these countries’ bonds and those issued by Germany have widened this year, hitting record levels in Greece.

The tremors come as officials in rich countries struggle with pressures once associated with so-called emerging markets: investors demanding that governments slash spending at a time of falling tax collections, soaring debts and, in many cases, growing public unrest.

The worries in Greece, Spain and Portugal stem in part from the benefits the southern European nations derived earlier this decade from using Europe’s common currency, the euro.

Their ability to issue cheap debt, thanks to the euro’s association with Germany’s sound-money policies, allowed them to borrow more than they could afford and sparked a boom in consumer spending, Randolph said. This also helped the high-saving, export-oriented economies of Northern Europe, by creating a bigger market for their goods.

"In a sense, the euro worked too well," he said. "The benefits masked the fact that these countries were losing competitiveness in terms of labor costs, and now that gap can’t be avoided."

In response, Greece recently promised to sharply cut its budget deficit, from a current level of 12.9% to 3% by 2012. Spain, already facing 19% unemployment after the collapse of a massive housing bubble, says it will cut spending by $70 billion over several years.

But given the scale of the problems and the massive borrowing needs of nations around the globe, it’s little surprise that default fears have failed to go away.

"There’s nothing so far to show they’ve fixed anything," said Tim Backshall, chief strategist for Credit Derivatives Research. "What we’ve seen is a dramatic selloff as investors start to adjust to the lower expectations for the euro area."

While Backshall said he believes most of the selling in government bond markets has come from so-called real money investors who hold securities for the long term, the past week has brought an uptick of traders playing what’s known as sovereign risk.

"Many hedge funds have spotted an opportunity in government debt markets where public finances have been under great stress," Randolph wrote in a recent note to clients. This trade involves "shorting the weaker credits against the stronger, playing on market fears and heightened uncertainty, while making money in the ensuing volatility."

That said, he thinks uncertainty will have to get much greater before there is a real risk of default in Greece, let alone Portugal, Spain or fiscally challenged Ireland. (Those noting the debt worries refer to Portugal, Ireland, Greece and Spain as Europe’s PIGS, and to that group plus Italy as the PIIGS.) Randolph notes that during the 1980s, Ireland’s bonds traded at similar spreads to Greece’s now, without any default.

What’s more, any possible default would deal a blow to the credibility of the euro itself. Economists don’t expect the European Central Bank to stand idly by while a monetary union that took years to assemble disintegrates.

"I believe the EU cannot let either Greece or Spain default, any more than Canada would allow one of its provinces to default," said Maurice Levi, a professor at the University of British Columbia in Vancouver.

But then, few in February 2008 would have predicted the scale of devastation in the financial sector before governments finally stepped in. And even if sovereign defaults still look like a long shot, higher rates and stability worries alone can do their damage when economies are in a weakened state.

That point was driven home Thursday by a stock market selloff led by banks. Spanish banks BBVA (BBVA) and Santander (STD) each plunged more than 9%. Falling spending and higher unemployment can wreak havoc on bank balance sheets, further impeding growth.

"The fundamentals in a lot of these places look pretty ugly," said Backshall. "There’s a sense this probably isn’t the end of this trade." 

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Plans to tame the government finances are “credible,” he told reporters in New Delhi. The EU backed on Feb. 3 the government’s proposals to trim the deficit after Papandreou pledged to raise fuel taxes and the retirement age and extended a wage freeze to all public workers.

Papandreou said today the proposals need to be implemented to achieve their goals, and the nation has substantial funds available from the EU. Yesterday the International Monetary fund said the Greek plan is “appropriate” and European Central Bank President Jean-Claude Trichet said he’s confident Greece can get the deficit under control.

The risk premium investors demand to buy Greek debt over comparable German 10-year bonds widened 10 basis points to 364 basis points the highest in a week. The benchmark ASE stock index fell for a third day, declining 2 percent, bringing its slide for this week to more than 9 percent.

The deficit reached 12.7 percent of gross domestic product last year, and officials are battling to convince investors it can shrink the shortfall to within the EU’S 3 percent limit in 2012 and avoid a bailout. Yesterday Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, suggesting that workers are ignoring Papandreou’s call for sacrifice.

“He can’t come out and say more needs to be done, he has to talk the plans up,” said Peter Dixon, an economist at Commerzbank AG in London. “The question becomes whether Greece can follow through with the plans they put in place and whether they are enough. The jury is still out on that.”

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