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http://finance.fortune.cnn.com/2011/04/22/europe-at-the-precipice/
Here is an article about Europe current financial problems in light of Greece's potential restructuring of debt, and building worries that Ireland and Portugal will be following right after. Europe has been feeling the stress as the euro continues to fall, and analysts say it might soon be on par with the dollar, if not below.
"I don't really see a solution in Greece or Ireland or Portugal that doesn't involve haircutting the debt," Minerd says. As that plays out, he adds, "We are looking at a massive credit crunch in Europe over the next 18 to 24 months."
The dollar appears to be rising according to this article as well.
Comments?
On another note, I tried to read an article on WSJ.com about AIG trying to sell securities for death-bets. Does anyone have an account there that could let me know more about that?
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I just cannot see an outcome where the larger more stable economies, such as germany and france, do not bail on the euro.
ReplyDeleteAnd, really, I do not see why they haven't already. I think they would be better off doing so.
Does anyone know why they might choose not to?
I agree with Dane that the powerhouse European economies (Germany, France) will either leave the euro or force out Ireland, Greece, and Portugal. These unstable countries have relied on their European neighbors to bail them out but I believe that the stable economies are getting tired of it.
ReplyDeleteBecky, I didn't understand what you meant when you said that the euro "might soon be on par with the dollar, if not below." The euro is currently worth $1.46 which is one of the highest exchange rates in history between the two. I'm just not sure what you meant (or the analyst meant) by this so can you please explain?
EUR/USD charts would suggest this isnt a issue as the Euro keeps appreciating. Unfortunately I cant paste a picture of the most recent chart but the all this negative news has done little to hurt the currency.
ReplyDeleteDebt and default are contagious and I cannot see how a default in Greece will not spur a crunch in Ireland and Portugal. I foresee a major restructure of the EU in the coming months unfortunately I do not know what type of impact this will have on the Euro perhaps we can discuss on Tuesday?
The article and the related ones by the same author suggested that if the EU bails these countries out it will hurt the Euro significantly. I'm not entirely sure on the specifics of this either and unfortunately have not been able to find a comprehensive explanation. However, as other economists have pointed out, we're not sure what it will do, they can only speculate.
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