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Eurozone Crisis Fast Becoming A Farce!

  • Written by Syndicated Publisher No Comments Comments
    June 27, 2012

    Global economies and markets are looking for a meaningful solution of the euro-zone crisis as their biggest hope for preventing a global recession.

    How realistic is that?

    Attempts to control or even end the crisis began two years ago with the first bailout of Greece in May, 2010. Bailout funds and so-called stability mechanisms were established that would supposedly ‘ring fence’ the rest of the eurozone and prevent the crisis from spreading.

    Whoops. Didn’t work. Ireland’s crisis came to a head and required a $113 billion bailout just six months later in November, 2010.

    But the EU, and particularly Germany and France, said “Ireland’s bailout will draw a line under the euro-zone’s debt crisis.”

    Portugal was struggling with its debt load and budget deficits, but Germany and France expressed confidence that Portugal could correct its problems on its own and avoid needing outside help.

    Nope. Six months later in May, 2011, as Portugal neared defaulting on its debt, the EU and IMF were forced to provide a $116 billion bailout. Like Ireland and Greece before it, in order to receive the funds Portugal had to agree to severe austerity measures to bring its deficits under control. They included public sector wage freezes, reductions in pensions, reductions in unemployment benefits, and increases in taxes, which would create a further drag on its economy and make it even more difficult to pull itself out of the mess.

    That was to be the end of the crisis, but already there were signs that the previous bailout of Greece was unraveling, and that far from being ring-fenced, the spread of the crisis was accelerating, with Spain’s debt and banking crisis spiraling toward a need for bailout. That was scary as it was thought Spain would be too big to bail-out.

    But no worry. Spain’s government insisted it had its situation under control and would not need a bailout.

    Whoops. This year had arrived, and Greece could not meet its next debt payments. After much haggling it needed another bailout in February.

    And there was Spain, in spite of its assurances, now standing on the edge of the same cliff, desperately asking that its banks be bailed out.

    Spain received that bailout two weeks ago, only to have it become clear that Spain’s government debt crisis was even worse than its banking crisis. So it’s now desperately seeking the bailout that was deemed a year ago as too much for the rest of the euro-zone to handle.

    Meanwhile, in Greece, the people rose up in protest over the tough austerity measures that had been imposed on it. The Greek prime minister was forced to resign. New elections were held last week, and a new government was formed. End of problems for Greece?

    No. The EU is meeting this week. On its agenda is the possibility of softening the austerity requirements it is imposing on Greece for its second bailout. The new prime minister of Greece and his newly appointed Finance Minister were to attend, and present Greece’s requests.

    But on Saturday it was announced that neither would be attending. The prime minister had undergone eye surgery, and his Finance Minister was “feeling nauseous”. And yesterday, the Finance Minister resigned, after only one week in office. It would be an unbelievable comedy if not for the hurt and damage the crisis is creating for Greece’s people and economy.

    And now this morning, Cyprus has become the next in line to seek a bailout from its crisis.

    A total of five euro-zone nations are now in bailout mode (Greece twice). That is 30% of the 17 countries in the euro-zone, with concerns now growing regarding Italy.

    And the world is looking to this week’s EU meeting to end the crisis?

    Good luck with that hope.

    The only potential positive is that there is so little confidence that the EU meeting will produce anything massive enough to resolve the crisis, that any action at all may be taken as a positive surprise.

    Subscribers to Street Smart Report: There is an in-depth ‘Global Markets’ signals report in the subscribers’ area of the Street Smart Report website from last night. And the next issue of the newsletter will be out tomorrow.

    To read my weekend newspaper column ‘Major Market Hopes Were Dashed – What Now?’click here.

    Images: Flickr (licence attribution)

    About The Author

    Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!
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