Reporting from Lisbon — Governments in Europe are scrambling to introduce austerity measures that would slash their budget deficits, as investor fears about high public-debt levels continued to hammer the continent's stock markets and currencies.
Britain's new coalition government used Tuesday's official state opening of Parliament, a ceremony filled with pomp and pageantry, to reiterate its commitment to getting the country's books in order.
"The first priority is to reduce the deficit and restore economic growth," Queen Elizabeth II said in the House of Lords, in accordance with tradition that the monarch outlines the agenda of the ruling government.
And the Italian government met Tuesday to discuss a plan that would cut $29 billion in spending. Details reported in Italian media said Rome would reduce the amounts it transfers to local governments as well as slashing the state payroll by freezing wages and hiring for three years, while gradually raising the retirement age for public-sector employees.
The British and Italian moves follow the painful spending cuts and tax hikes announced by Greece, Spain and Portugal as those countries try to narrow their budget gaps and stem the loss of market confidence in their economies.
Europe's main stock markets saw sharp sell-offs Tuesday, with the exchanges in London, Paris and Frankfurt all shedding about 3% of their value. Meanwhile, the battered euro, already down against the U.S. dollar to one of its lowest levels in four years, struggled to maintain an even keel. It closed at $1.23, down one cent.
The British pound was also down slightly against the dollar, despite the new government's tough austerity talk Tuesday.
The new coalition made good Monday on a Conservative Party campaign pledge to announce an immediate program of about $9 billion in spending cuts. Among the measures are the closure of some smaller agencies, a government hiring freeze and the cancellation of some state-funded projects.
In a feisty attack on the economic management of his Labor Party predecessors, Conservative Prime Minister David Cameron said his government had inherited "a deficit that is bigger than Greece's."
But Monday's cuts add up to barely 4% the size of the deficit, and whether the markets deem that a good enough start remains to be seen.
"The cuts we have just heard about are the easy bit of the story," commentator Hamish McRae wrote in Tuesday's edition of the Independent newspaper. "The tough choices are ahead."
Nor do investors appear impressed by the even harsher budget plans announced elsewhere in Europe. The uncertainty stems largely from questions about whether those governments will follow through in the face of public opposition and unrest.
In unusually strong terms, the International Monetary Fund warned Spain on Monday that it must not balk at reforming its labor market — unemployment there has topped 20% — or consolidating its banks, which have been hard hit by the collapse of a sizable real estate bubble.
U.S. Treasury Secretary Timothy F. Geithner arrives in London on Wednesday for meetings with European officials about the economic situation there ahead of next month's Group of 8 gathering in Canada of the heads of the major world economies.
Speaking to reporters during his visit to China on Tuesday, Geithner reiterated his belief that Europe can solve its economic problems. "It's important to understand that Europe has the capacity to manage these challenges. And we're confident they will," he said.
Geithner also will meet Wednesday with British officials, including the new finance minister, George Osborne, and Bank of England head Mervyn King. Then Geithner will travel to Frankfurt, Germany, for a working dinner with Jean-Claude Trichet, president of the European Central Bank.
Jim Puzzanghera in the Washington bureau contributed to this report.