Europe's outlook darkens as Germany, U.K. make cuts

By Aoife White and Robert Barr ASSOCIATED PRESS

LUXEMBOURG (AP) — Europe’s economic picture darkened further Monday as Britain’s prime minister declared the nation’s finances to be worse than feared — requiring sacrifices that will affect “our very way of life” — and the euro slid further toward parity with the dollar.

From small EU nations such as Hungary and Greece to big ones such as Germany, which on Monday announced its own harsh austerity measures, the Continent’s economic and fiscal crisis is showing no sign of letting up.

Germany, Europe’s economic powerhouse, promised a raft of spending cuts, vowing to “set an example” for heavily indebted Greece, Spain and Portugal, which are buckling under their debt loads and threaten to drag Europe’s currency union down with them.

With even an unprecedented multibillion-dollar rescue package failing to fully persuade investors, European nations are scrambling to regain credibility and shore up market confidence by proving they can get their houses in order.

There is no doubt the cuts will be painful, and government leaders are preparing their citizens for the blow.

German Chancellor Angela Merkel said Germany needs to save 80 billion euros ($96 billion) through 2014 by reducing handouts to parents, cutting 15,000 government jobs and delaying projects such as construction of a replica of a Prussian palace in Berlin.

British Prime Minister David Cameron warned in a speech of painful cutbacks that may shape the nation for an entire generation and are necessary because “the overall scale of the problem is even worse than we thought.”

“How we deal with these things will affect our economy, our society — indeed our whole way of life,” he said. “The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades to come.”

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