THE EURO HAS fallen to its lowest level against the dollar in almost two years amid increasing concern over Spain’s rising borrowing costs and the release of data today which shows a drop in economic sentiment across the eurozone.

At the time of writing, the euro was trading at $1.2426 and at GB£0.7982.

Today Commissioner Olli Rehn said that Spain should be given an extra year to meet its deficit targets, but that this extension should only be granted if the government can effectively control excessive spending in the semi-autonomous regions and present “solid two-year budget plans for 2013 and 2014″.

Meanwhile, the European Commission said today that the latest economic sentiment indicator had fallen 2.3 points between April and May to 90.6. The sentiment index fell by 2.7 points across the entire EU to 90.5.

The sharpest sentiment drops were reported in the UK (down 4.7 points), Italy (down 4.3) and the Netherlands (3.9)

Confidence in industry and production expectations also dropped in May, as did construction confidence and retail trade confidence.

However, consumer confidence improved by 0.8 points in the EU and 0.6 points in the eurozone, though consumers’ assessment of their personal financial situation remained unchanged across the EU and dropped slightly in the eurozone.

- Additional reporting by the AP