EURO CRISIS
The danger of a euro crisis is increasing; it may prompt more political integration, not less.The signalling is coming not from the foreign-exchange market (the euro has climbed back from its October low against the dollar) but from the bond markets. Spreads on the ten-year government debt of Greece, Ireland, Italy, Portugal and Spain over that of Germany have widened sharply. Rating agencies are paying particularly close attention to the fiscal positions of the profligate five: Standard & Poor’s has downgraded three of them and put another on credit watch.
That need not imply a straightforward bail-out. But it does suggest the euro area might need an equivalent of the International Monetary Fund’s rescue packages. It would imply both a bigger role for the centre and more intrusive monitoring of euro members’ budgets. Far from fulfilling the eurosceptics’ dream of kiboshing the entire European project, a crisis could thus lead to even deeper political integration. That is a guess. But some form of euro drama looks ever more likely—and it would be better if governments started preparing for it now.
Dear Governments get ready for that !!!
Euro Crisis Said,
February 15, 2010 @ 4:15 am
Euro Crisis
There is a big difference between a liquidity problem and a solvency problem. When a company or a country has enough assets to cover its liabilities but they have a problem raising the money they need to pay off the loan they have a liquidity problem. But when an entity has more debt than it can serve than it has a solvency problem and in that case more debt and loans will only dig it into a bigger hole. Greece has a liquidity problem since it has much more debt than the economy can serve. Germany and the Euro are perhaps will to give them loan in attractive interest rates but unless they are willing to consistently transfer money from the core of Europe to the weak countries those countries are doomed.
If German politicians think they can convince there citizens to fund Greece’s recklessness throw transfer payments all I have to say to them is GOOD LUCK!