You think that the meetings in Brussels will bring some resolutions? News from the finance ministers’ meetings and from elsewhere aren’t too good. Worrying signs about the European debt crisis come from 6 different countries. Here’s a quick update.
The leaders are discussing and negotiating and they just add to the mess. Let’s start with the troubled countries and reach surprising countries as well:
- Greece: No decision made. The leaders are awaiting final result from the delegation sent to check up on the country’s progress. Well, everybody knows they didn’t meet expectations. A delay in making decisions isn’t needed for new checkups, and they reflect the fact that the leaders don’t know what to do. This ongoing uncertainty is bad for everybody. Let Greece default.
- Portugal: Bailout package agreed. Well, this was certainly expected, but the details are worrying. Portugal will have a limited time of 3 years to pay back, and is required to make austerity measures in the meantime. No debt restructuring included. Didn’t they learn anything from Greece? Probably not. The time period will likely be extended in the future, eventually leading to a default.
- Ireland: It’s becoming clear that the mountain of debt is unsustainable. Yet the finance ministers failed to agree on a lower interest rate for the emerald isle. What Ireland needs is a decoupling from its banks. Currently it just continues with plan that is taking it down. No hope there either.
- Spain: The euro-zone’s fourth largest country, often marked as the “next domino†reportedly has billions of hidden debt. at about 26 billion euros. Needless to say, this hurts the country’s efforts to distance itself from Portugal, Ireland and Greece.
- Cyprus: This small country was warned by Moody’s that it will be downgraded. Well, another downgrade in a small country? Where are the news? The answer is in the reason for the downgrade – exposure to Greek debt. This is yet another sign of contagion and may reach banks and sovereigns in Western Europe as well.
- Sweden: Don’t worry, Sweden is doing alright. The news are that Sweden joins Denmark in allowing senior bondholders to undergo a haircut. The Euro-zone countries will eventually follow. This is a sign. In the meantime, the debt is transfered from the banks to the taxpayers via bailouts.
At least for now, the Euro is still stable. For now. See upcoming events and technical analysis in the EUR USD forecast.
